9/10/07 Untested Waters
Creditors for Beazer Homes have served notice that they intend to call in $1.3 billion of debt, the company announced Friday. Fearing this creditors' move, Beazer filed a request in U.S. District Court in Atlanta on Aug. 21 asking the court to bar the collection efforts of U.S. Bank National Association, the trustee of the loans at issue. Beazer contends it has not violated the terms of the loan agreements. In its August court filing, the company notes that it has never missed a debt payment. Six days after Beazer's filing, U.S. District Court Judge Julie E. Carnes entered an order that Beazer should file a formal request for an injunction before she could rule. To date, no request has been filed.
"We're in untested waters right now in terms of the complexity of the financial instruments in play," says Stephen Mihm, author of the just-published "A Nation of Counterfeiters: Capitalists, Con Men, and the Making of the United States." "I'm not so concerned about what happens tomorrow, but, eventually, there's a day of reckoning," adds Mihm, who teaches American history at the University of Georgia.
Allan Sloan: "Even though you're not risking your capital when you stash your dough in a Treasury money fund, you're risking something: your income. Yields on short-term Treasury securities have plunged because investors seeking a safe haven have poured so much money into that market. The average Treasury fund yielded 4.20 percent on Aug. 14, according to iMoneyNet. The most recent yield: a mere 3.62 percent. That's a 15 percent drop in a bit over three weeks. During that same period, the average yield on "prime" money funds has actually risen, iMoneyNet says, and is up to 4.64 percent from 4.56. In other words, the spread between Treasury funds and other funds has almost tripled - to 1.02 points from 0.36 of a point - almost overnight." My questions are simple. The dollar made a 15-year low on Friday as seen in the U.S. Dollar Index. Are you willing to buy a Treasury bill and see your purchasing power tank? Does a printing press make a Treasury bill risk free?
The WSJ reports that growing uncertainty about the U.S. economy -- prompted by the recent liquidity crisis in credit markets caused by subprime mortgage loan risk -- "in part" may translate into some uncertainty within the Federal Reserve's current inflation outlook, Philadelphia Federal Reserve President Charles Plosser said Saturday. But he added that the reserve system seems to be dealing effectively with such uncertainty by providing more liquidity in the form of repurchase agreements and by having lowered the discount rate and increased temporarily the term during which funds borrowed can be held. ``Disruptions in financial markets can be addressed using the tools available to the Federal Reserve without necessarily having to make a shift in the overall direction of monetary policy,'' Plosser said yesterday. One might note liquidity does not equate to credit worthiness. Preach liquidity to the Beazer creditors.
According to the FDA, Boston Scientific committed "serious violations" of federal regulations by failing to report two deaths in a clinical trial. That's comical. What's is the definition of a non-serious violation? Heartburn?
Listening to Bush, you get the thought that just maybe he has begun drinking again. He referred to Australia as Austria and to APEC as OPEC. The next thing he might state is that, since we invaded Iraq, 37 of our Finest have been killed rather than 3700+.
According to the SF Chronicle, Fair Isaac has devised new formulas for the three major U.S. credit bureaus - Experian, Equifax and TransUnion - that will no longer factor authorized user accounts into credit scores. While the move will put an end to piggybacking, Fair Isaac says as many as 3.3 million people in the United States will effectively lose their credit score because their credit history was established only through authorized user accounts. The company also said about one-third of about 165 million people who qualify for a Fair Isaac score have at least one authorized user on one of their credit accounts, usually a spouse, child or other family member. John Ulzheimer, president of educational services for Credit.com in San Francisco, which provides credit and personal finance services, said consumers without established credit scores will have a difficult time obtaining loans or applying for credit online or through an automated system - and they probably won't realize why. The majority of those affected by the formula change are women, he added. "When people get married, one of the spouses changes the way they use credit, and in more cases than not it's the woman," Ulzheimer said. "The problem is that 50 percent of people in this country who get married also get divorced. If these people have nothing but authorized-user history, they'll be starting with a new credit score."
International oil markets have enough oil, but a lack of capacity to refine it was contributing to high prices, OPEC's president told reporters on Sunday. "Current supplies to the petroleum market are sufficient," OPEC President and United Arab Emirates Oil Minister Mohammed al-Hamli said. OPEC's output was just over 30 million bpd, he said. OPEC produced 30.37 million bpd in August, over a third of the world's 85 million bpd supply, according to a Reuters survey.
Satyajit Das: "There is no difference between a run on a bank and shutdown of access to funding from the capital markets. US mortgage lenders faced old-fashioned runs. Central banks pumped money into the system. The Fed cut the discount rate. Four major US banks used the discount window: “to encourage its use by other financial institutions”. They did not need cash. It was a sign of strength. In the words of financial historian, Charles Geisst, it was : “like someone from the Upper East Side being seen in .. Wal-Mart”. The problem was credit risk not liquidity. Lack of information and diffusion of risk meant that no one was certain who had exposure to what or to whom. EBC governor Jean-Claude Trichet pleaded for everybody “to keep their composure”. It was reminiscent of Emperor Hirohito’s response to the bombing of Hiroshima: “the War situation has developed not necessarily to Japan’s advantage.”...The new liquidity factories were based on the new age idea of “risk transfer”. The shell game requires three shells and a small, soft round ball, about the size of a pea. The pea is placed under one of the shells, then quickly the shells are shuffled around. Bets are taken from the audience on the location of the pea. It is a confidence trick used to perpetrate fraud. Through sleight of hand, the operator easily hides the pea, undetected by the victims. Risk transfer is the shell game of the credit markets; a short con, quick and easy to pull off. Central banks believe that if banks sell off their risk then it is distributed widely reducing the chance of a crash. Banks frequently don’t sell off their real risks. For regulatory capital reasons, they sell off less risky loans. In a CDO, the bank typically takes all or a portion of the equity tranche. This is “hurt money” or the “skin in the game” to reassure other investors. Banks must hold the loans until they can be sold. If there is a market disruption and the bank is unable to sell then the risk remains with the bank. The risk may also return to the bank via the back door. Where it acts as a prime broker –executing trades, settling transactions and financing hedge funds – the bank lends to investors using the CDO securities created as collateral. If the value of the securities falls and the hedge fund is unable to post additional margin to cover the loss then the bank is exposed to the risk of the securities. The bank assumes that it can sell the securities it is holding to pay itself back. There are few prime brokers - three dominate the business - concentrating the risk...As the 2007 credit crisis unfolded, there was no liquidity for structured securities. There was only one marketmaker - the person who sold it to you in the first place. In a dealing room during a crisis, the first rule is do not answer phone calls from clients. The second rule is say “wrong number” if you accidentally pick up the phone. Inability to price or trade means that fund managers cannot establish current portfolio values or allow withdrawals of investor money. This forced funds to suspend withdrawals. Prime brokers could not establish the value of collateral. Where investors failed to make “top up” margin calls, the prime brokers could not sell the collateral securing their loans. They couldn’t get back their money and were at risk of further falls in the value of securities..In Western societies, there is an increasing obesity problem, in part caused by poor diets that include fast food. A diet of cheap and excessive debt has created a bloated financial system. Crash diets rarely work. The solution requires will power, a sensible but reduced food intake and exercise. In financial markets, the resolution requires regulatory will and an imposition of market disciplines on errant investors and banks. It also requires a sharp reduction in debt levels and addressing the problems of risk transfer, model risk and market transparency.I am not hopeful that the required reassessment will occur. The current credit crunch will be the new wonder diet snack for financial markets. It will have some short term effects but leave the root cause untreated."
Mike Burk: "The 3rd year of the Presidential Cycle is the strongest of the 4 and, since 1939, the first 9 months of the 3rd year of the Presidential cycle have never been down. Although up, this year ranks as the worst since 1947...The DJIA reached its all time high on July 19 and a recent low less than a month later on August 16 when the NYSE recorded the 3rd highest number of new lows ever at 1132. The extreme number of new lows at the mid August low along with the continued underperformance of the secondaries suggest this decline has further to go...Seasonally, the strongest part of September is over and most indications are we are in the down part of the cycle. I expect the major indices to be lower on Friday September 14 than they were on Friday September 7."
China's consumer price index leapt from 4.4 per cent in June to 5.6 per cent in July - a 10-year high, and up from only 3.3 per cent in March. "China has exported deflation in the past, but that's now changing," says Gerard Lyons, chief economist at Standard Chartered. "And as inflation becomes more of a concern around the world, the inflationary impact of China is becoming much more important." "China is only in the early stages of a rapid industrialisation - so its commodity demand will become even more inflationary over time," says Gabriel Stein, a senior economist at Lombard Street Research. "And now the deflationary benefits of cheap Chinese labor are receding as well, as the country tries to move up the value chain."
China's currency, the yuan, has risen almost 10 per cent against the dollar since 2005, pushing up export prices even more.
Audre Lorde: “If I didn't define myself for myself, I would be crunched into other people's fantasies for me and eaten alive.”
Sunday, September 09, 2007
Saturday, September 08, 2007
Libor
9/9/07 Libor
Randall Forsyth: "Why the divergent action between Libor and the two-year Treasury, both of which typically track the funds rate? It's a matter of trust, says Robert Kessler, who heads the eponymously named Kessler Investment Advisors, a Denver-based manager of Treasury securities for institutions and wealthy individuals. Unlike interbank lending, Treasuries are free of credit risk. And even though Libor is based on rates from the world's largest banks, confidence is so fragile that the market demands a premium to lend past overnight. Moreover, "tiering" has returned to the money market, with Barclays and Credit Suisse posting three-month rates of 5.80%, eight basis points above Libor, as calculated by the British Bankers' Association. All of which would be largely academic except that Libor will determine the rate on billions of dollars' worth of American adjustable-rate mortgages. ARM resets are set to climb sharply, to over $50 billion per month starting last month through year end, reaching a crescendo over $100 billion by next March. Cumulatively, some $1.3 trillion of ARMs will reset over the two years through December 2008. Most of those ARMs will be reset at a spread of several points over Libor, meaning some of those borrowers may face mortgage rates of close to 10%. The recent rise in Libor will exacerbate this squeeze. Indeed, a 25-basis-point cut in the funds rate would merely offset the rise in Libor, leaving actual borrowing costs unchanged for much of the economy."
July job growth was revised down to 68,000 from 92,000. June gains were revised to 69,000 from 126,000. This is why I stopped wasting my time predicting employment. Revisions make the effort meaningless.
Yves Smith: "Those who have been following the job creation story weren't surprised at the weak BLS employment (the so-called "non-farm payroll") report today, or by the fact that it revised the results for the last three months downward by 81,000. Various commentators (see here, here, and here) have observed that the rises reported in recent months have been due almost entirely to a "voodoo calculation, the "birth/death model" a plug to allow for business creation and failure (one we've commented on before). Note this feature was added in 2001.And where had these jobs supposedly been created? In construction. Need we say more?"
Wells Fargo & Co. will help borrowers struggling to make payments and, in some cases, will change loan terms rather than foreclose on properties, the company's chief executive said Friday.
The Daily Reckoning: "The problem is that even though the feds are making money available, lenders are becoming reluctant to lend and borrowers are becoming reluctant to borrow. That's why we see the London Inter-Bank Lending Rate - LIBOR - so far above the central banks' base rates. The government, through central bank intervention, can set one rate. But the banks have one of their own. And right now, banks are wary about lending a lot of money to each other - because they can't figure out what each other's real financial situation is."
Nouriel Roubini: "The utterly ugly employment figures for August (a fall in jobs for the first time in four years, downward revisions to previous months’ data, a fall in the labor participation rate, and an even weaker employment picture based on the household survey compared to the establishments survey) confirm what few of us have been predicting since the beginning of 2007: the U.S. is headed towards a hard landing."
Brett Steenbarger: "Fri. decline left us with 28% of SPX stocks above their 50 day MA, down from 50% earlier this week. Broad loss of momentum."
Seattle-based Nordstrom opened its first store Friday in Massachusetts. The store in the Boston suburb of Natick is 144,000 square feet, typical for a new Nordstrom, and features a men's grooming studio — another first for the retailer — eyebrow bar and sunglass boutique. Nordstrom now has 99 full-line department stores in 28 states. If I should ever get lost and visit an eyebrow bar, please kick me where it hurts.
A US federal judge declared in a ruling on Friday that Iran must pay $2.65 billion to nearly 1000 family members and a few survivors of the 1983 bombing of the US Marine barracks in Lebanon that killed 241 soldiers. I know the courts are backed up, but 24 years.
Sen. Dick Durbin (D-Ill.), the No. 2 leader in the Senate, said Friday that he will not vote for more supplemental war funding bills unless a strategy for withdrawal is attached, signaling a new level of conflict between the White House and Congress over the war. I wonder if gutless Pelosi and gutless Reid will choose the same Durbin strategy.
The 2-year Treasury yields 4.10%. The 3-month Libor rate is 5.72%. What does it matter if the Fed lowers fed funds to 5% on Sept.18? At least $329 billion, or 40% of all U.S. corporate bonds sold in 2007 used Libor as a benchmark.
Between The Hedges: "Moreover, the 10-week moving average of the percentage of bears is currently at 39.3%, a high level. The 10-week moving average of the percentage of bears peaked at 43.0% at the major bear-market low during 2002. The 50-week moving average of the percentage of bears is currently 37.1%, an elevated level seen during only two other periods since tracking began in the 1980s. Those periods were October 1990-July 1991 and March 2003-May 2003, both of which were near major stock market bottoms. The extreme readings in the 50-week moving average of the percentage of bears during those periods peaked at 41.6% on Jan. 31, 1991, and 38.1% on April 10, 2003. We are currently very close to eclipsing the peak in bearish sentiment during the 2000-2003 market meltdown, which I still find astonishing, notwithstanding the recent correction. The S&P 500 is still 101.3% higher from October 2002 lows and is only 5.9% lower from its recent record set in July. "
Mike Shedlock: "The unemployment rates is based on the Household Survey. Notice how 340,000 civilian jobs were lost and total employment fell by 316,000 jobs, but magically unemployment fell by 24,000. Raise your hand if that makes sense to you."
India's Sensex equities index gained 1.8% (up 13.1% y-t-d). China's Shanghai Composite index added 1.1% to close at yet another record high (up 97% y-t-d and 218% over the past year).
Bloomberg reported that "IndyMac Bancorp Inc., the second-biggest U.S. mortgage company, plans to cut 10 percent of its workforce and lower the dividend as housing sales falter and home-loan defaults climb. It may post a loss for the first time in at least eight years."
Robin Bhar, of UBS in London, added that gold physical demand was accelerating in India, the world’s largest gold consumer, China and the Middle East. “Gold underlying fundamentals are improving,” Mr Bhar said.
Abraham Lincoln: “These capitalists generally act harmoniously and in concert, to fleece the people”
Randall Forsyth: "Why the divergent action between Libor and the two-year Treasury, both of which typically track the funds rate? It's a matter of trust, says Robert Kessler, who heads the eponymously named Kessler Investment Advisors, a Denver-based manager of Treasury securities for institutions and wealthy individuals. Unlike interbank lending, Treasuries are free of credit risk. And even though Libor is based on rates from the world's largest banks, confidence is so fragile that the market demands a premium to lend past overnight. Moreover, "tiering" has returned to the money market, with Barclays and Credit Suisse posting three-month rates of 5.80%, eight basis points above Libor, as calculated by the British Bankers' Association. All of which would be largely academic except that Libor will determine the rate on billions of dollars' worth of American adjustable-rate mortgages. ARM resets are set to climb sharply, to over $50 billion per month starting last month through year end, reaching a crescendo over $100 billion by next March. Cumulatively, some $1.3 trillion of ARMs will reset over the two years through December 2008. Most of those ARMs will be reset at a spread of several points over Libor, meaning some of those borrowers may face mortgage rates of close to 10%. The recent rise in Libor will exacerbate this squeeze. Indeed, a 25-basis-point cut in the funds rate would merely offset the rise in Libor, leaving actual borrowing costs unchanged for much of the economy."
July job growth was revised down to 68,000 from 92,000. June gains were revised to 69,000 from 126,000. This is why I stopped wasting my time predicting employment. Revisions make the effort meaningless.
Yves Smith: "Those who have been following the job creation story weren't surprised at the weak BLS employment (the so-called "non-farm payroll") report today, or by the fact that it revised the results for the last three months downward by 81,000. Various commentators (see here, here, and here) have observed that the rises reported in recent months have been due almost entirely to a "voodoo calculation, the "birth/death model" a plug to allow for business creation and failure (one we've commented on before). Note this feature was added in 2001.And where had these jobs supposedly been created? In construction. Need we say more?"
Wells Fargo & Co. will help borrowers struggling to make payments and, in some cases, will change loan terms rather than foreclose on properties, the company's chief executive said Friday.
The Daily Reckoning: "The problem is that even though the feds are making money available, lenders are becoming reluctant to lend and borrowers are becoming reluctant to borrow. That's why we see the London Inter-Bank Lending Rate - LIBOR - so far above the central banks' base rates. The government, through central bank intervention, can set one rate. But the banks have one of their own. And right now, banks are wary about lending a lot of money to each other - because they can't figure out what each other's real financial situation is."
Nouriel Roubini: "The utterly ugly employment figures for August (a fall in jobs for the first time in four years, downward revisions to previous months’ data, a fall in the labor participation rate, and an even weaker employment picture based on the household survey compared to the establishments survey) confirm what few of us have been predicting since the beginning of 2007: the U.S. is headed towards a hard landing."
Brett Steenbarger: "Fri. decline left us with 28% of SPX stocks above their 50 day MA, down from 50% earlier this week. Broad loss of momentum."
Seattle-based Nordstrom opened its first store Friday in Massachusetts. The store in the Boston suburb of Natick is 144,000 square feet, typical for a new Nordstrom, and features a men's grooming studio — another first for the retailer — eyebrow bar and sunglass boutique. Nordstrom now has 99 full-line department stores in 28 states. If I should ever get lost and visit an eyebrow bar, please kick me where it hurts.
A US federal judge declared in a ruling on Friday that Iran must pay $2.65 billion to nearly 1000 family members and a few survivors of the 1983 bombing of the US Marine barracks in Lebanon that killed 241 soldiers. I know the courts are backed up, but 24 years.
Sen. Dick Durbin (D-Ill.), the No. 2 leader in the Senate, said Friday that he will not vote for more supplemental war funding bills unless a strategy for withdrawal is attached, signaling a new level of conflict between the White House and Congress over the war. I wonder if gutless Pelosi and gutless Reid will choose the same Durbin strategy.
The 2-year Treasury yields 4.10%. The 3-month Libor rate is 5.72%. What does it matter if the Fed lowers fed funds to 5% on Sept.18? At least $329 billion, or 40% of all U.S. corporate bonds sold in 2007 used Libor as a benchmark.
Between The Hedges: "Moreover, the 10-week moving average of the percentage of bears is currently at 39.3%, a high level. The 10-week moving average of the percentage of bears peaked at 43.0% at the major bear-market low during 2002. The 50-week moving average of the percentage of bears is currently 37.1%, an elevated level seen during only two other periods since tracking began in the 1980s. Those periods were October 1990-July 1991 and March 2003-May 2003, both of which were near major stock market bottoms. The extreme readings in the 50-week moving average of the percentage of bears during those periods peaked at 41.6% on Jan. 31, 1991, and 38.1% on April 10, 2003. We are currently very close to eclipsing the peak in bearish sentiment during the 2000-2003 market meltdown, which I still find astonishing, notwithstanding the recent correction. The S&P 500 is still 101.3% higher from October 2002 lows and is only 5.9% lower from its recent record set in July. "
Mike Shedlock: "The unemployment rates is based on the Household Survey. Notice how 340,000 civilian jobs were lost and total employment fell by 316,000 jobs, but magically unemployment fell by 24,000. Raise your hand if that makes sense to you."
India's Sensex equities index gained 1.8% (up 13.1% y-t-d). China's Shanghai Composite index added 1.1% to close at yet another record high (up 97% y-t-d and 218% over the past year).
Bloomberg reported that "IndyMac Bancorp Inc., the second-biggest U.S. mortgage company, plans to cut 10 percent of its workforce and lower the dividend as housing sales falter and home-loan defaults climb. It may post a loss for the first time in at least eight years."
Robin Bhar, of UBS in London, added that gold physical demand was accelerating in India, the world’s largest gold consumer, China and the Middle East. “Gold underlying fundamentals are improving,” Mr Bhar said.
Abraham Lincoln: “These capitalists generally act harmoniously and in concert, to fleece the people”
Thursday, September 06, 2007
Insolvency
9/7/07 Insolvency
Bill Bonner: "The problem is not illiquidity, it’s insolvency – caused by too much credit, not too little. People, businesses, nations – debtors owe more than they can repay. Borrowing more may postpone the crisis...maybe even disguise it; it cannot solve it.
Chesapeake Energy will cut 6% of its natural gas output due to low prices.
Wal-Mart's August sales at stores open at least one year rose 3.1%. Including the impact of fuel sales same-store sales rose 3%. The company expects same-store sales of its U.S. operations for the September period to be between 1% and 3%. With the stock at $42+, one might consider buying the stock and selling a $45 call against the purchase. That seems like a low risk strategy to me.
The European Central Bank, on a day in which it injected $57 billion (42 billion euros) into the banking system, held interest rates steady Thursday. The European Central Bank said that 526 million euros ($715 million) was borrowed at its marginal lending facility, which is akin to the Federal Reserve's discount window, at 5%. The ECB separately conducted a one-day tender.
Nordstrom Inc.'s August same-store sales rose 6.6%.
China lifted the reserve requirement ratio by 0.5-percentage points Thursday, forcing domestic banks to increase the amount of funds they must set aside as reserves in relation to loans for the seventh time this year. Starting Sept. 25, banks must set aside 12.5% of deposits as reserves, the People's Bank of China said on its Website Thursday. The central bank statement said the policy change was targeted at "strengthening liquidity management in the banking system and checking excessive money and credit growth".
The Bank of England said it's too soon to tell how the disruption in financial markets will impair the availability of credit to companies and households, as it kept its key interest rate on hold at 5.75%.
Nippon Steel, the world's second-largest maker of the alloy, lifted its sales forecast for the fiscal year ending March 30 to 4.8 trillion yen, an increase of 0.8% from 4.76 trillion yen forecast earlier, the company said in a statement posted on its Website. The steel maker intends to pay an interim dividend of 5 yen per share, up from 4 yen a year earlier. Nippon Steel also said it would lift its first-half net profit forecast to 170 billion yen from 160 billion yen.
Monster Worldwide Inc.'s online-recruitment index showed its lowest-ever annual growth rate in August, "a further indication of softening employer demand for labor," the online recruiter said. The index rose 3 points in August from July, to 186, reflecting "a slight rebound" in the availability of jobs online across a majority of industries, occupations and regions. The index sat at 173 in August 2006. The index rise was smaller than usual for August and reduced the index's annual growth pace to roughly 7.5%, the lowest on record.
Anglo-Australian miner BHP Billiton and Brazilian miner Companhia Vale do Rio Doce, or CVRD, may team up to launch a takeover bid for mining rival Rio Tinto, according to reports citing market rumors.
Jeremy Grantham: "Even if the credit crunch passes without a major catastrophe, the prices of stocks, bonds and real estate have a long way to fall."
Thomas P. Au: "When Bill Gross of Pimco shocked the investment world by estimating the value of the Dow at 5000 in 2002, he was probably referring to its bond value. My own estimate of this metric, updated to 2007, is something like 6700. In a 1930s scenario, blue chip stocks won’t go to zero, but they will fall to the point where they (collectively) yield more on dividends than Treasury bonds will yield in interest. Then stocks will be trading like bonds, having lost all of the option premiums that characterized their valuations during the period of general belief in the new economy. And in worst case situations like 1932 and 1974, the Dow went to about half of its bond value, a valuation that would put it between 3000 and 3500."
The Energy Insider: "Solar costs about 25 cents a kilowatt hour. That's compared to about 9 cents a kilowatt hour for natural gas and 5 cents a kilowatt hour for modern coal-burning plants, as well as 6 cents a kilowatt hour for wind energy if tax considerations are included. The good news is that the cost of solar power is falling all the time. It once stood at $1 a kilowatt hour and advocates say that it could soon cost 12-16 cents a kilowatt hour."
Investment banks need to restore investor confidence by making a concerted effort to reveal the full extent of any losses arising from the credit market turmoil, Josef Ackermann, chief executive of Deutsche Bank, has urged. Mr Ackermann said investors lacked confidence in the financial markets and in the banking sector because they were uncertain of the size and location of the losses. He said investment banks should provide clarity by valuing their credit exposure to current market levels.
According to the FT, Kazakhstan on Thursday demanded greater control over the giant Kashagan oilfield in the Caspian Sea on Thursday, complaining that inadequate management of the project by a foreign consortium led by Italy’s Eni had damaged the Central Asian republic’s economy and reputation as a reliable global energy supplier. Karim Massimov, Kazakh prime minister, said that KazMunaigas, the state oil company, should be appointed as co-operator at Kashagan where Eni had proved “incapable of fulfilling some of its obligations. KazMunaigas currently holds an 8.33 per cent interest in Kashagan alongside partners Eni, Shell, ExxonMobil, Total, ConocoPhillips and Inpex of Japan.
Biogen Idec sees FY non-GAAP EPS $2.60 to $2.70.
The Reserve Bank of Australia has widened the range of securities it’s willing to buy in so-called repurchase agreements in order to boost the amount of money available in the nation’s banking system.
Countrywide Financial is laying off another 900 employees as a result of decreased lending and increased defaults resulting from the worst U.S. housing slump in two decades.
India's Ranbaxy Laboratories has submitted a preliminary bid for U.S.-based Bradley Pharmaceuticals, the Economic Times reported on Thursday, citing a source close to the development. Indian media had earlier reported Hyderabad-based Dr Reddy's Laboratories was in the race for Bradley.
Target Corp. expects September sales at stores open at least one year to rise in a range of 4% to 6%. Its August same-store sales rose 6.1%
Unit labor costs increased at a 1.4% annual rate, down from the earlier estimate of 2.1%. Over the past four quarters, the output per hour of American businesses has increased 0.9%, up from the initial estimate of a 0.6% rise. Unit labor costs was up 4.9% over the past year, the fastest pace since the third quarter of 2000.
The number of initial claims in the week ending September 1 fell 19,000 to 318,000. It's the lowest level since the week ended Aug. 4.
Credit derivatives awarded the top ratings by Moody's Investors Service and Standard & Poor's may be as vulnerable to default as high-risk, high-yield bonds, according to independent research firm CreditSights Inc.
According to the Morgage Bankers Association's quarterly delinquency survey, a seasonally adjusted 0.65% of loans on one- to four-unit residential properties entered the foreclosure process during the period, the highest level in the survey's 55-year history. In the first quarter, when the previous record was set, 0.58% of loans entered the process; a year ago, 0.43% entered the process.
The ISM non-manufacturing index was unchanged at 55.8% in August.
U.S. natural gas supply up 36 bln cubic feet: Energy Dept.
The American Petroleum Institute reported a fall of 4.8 million barrels in crude supplies for the week ended August 31. The Energy Department had reported a decline of 3.9 million barrels for the latest week. Motor gasoline supplies were up 1.6 million barrels, the API said. The government reported that supplies were down 1.5 million barrels. Distillate supplies climbed 3.3 million barrels, the API said. They were up 2.3 million barrels, according to the Energy Department.
The outstanding volume of commercial paper fell by $54.1 billion to $1.93 trillion, or 2.7%, last week, the Fed reported Thursday. Outstanding paper dropped by a record $259 billion, or 11.9%, in August.
Syria has said its air defenses opened fire on Israeli warplanes after they violated its airspace in the north of the country.
Dallas Fed President Richard Fisher said recent economic data has been "rather positive," and pointed specifically to the August ISM services index, which was unchanged at 55.8%. Fisher said anecdotal reports from throughout his district and across the country point to "a labor shortage." "People are having trouble finding everything from day workers to bank tellers," Fisher said. "The good news is the financial turmoil that we have recently seen came against a background of a very strong economy. I don't see the dynamics of that growth changing overnight," he said.
October crude climbed 57 cents to close at $76.30 a barrel Thursday. December natural gas retreated from a high near $6 to close at $5.65 per million British thermal units, down 2.7%.
December gold climbed $13.90, or 2%, Thursday to close at $704.60 an ounce. December silver gained 17.8 cents, or 1.4%, to finish at $12.533 an ounce and December copper tacked on 1.2% to close at $3.3025 a pound.
Atlanta Fed President Dennis Lockhart: "So far, I have not seen hard or soft data that provide conclusive signs that housing problems are spilling over into the broad economy."
Baker Hughes Inc. filed to sell up to $2 Billion in a mixed securities. The "Use of Proceeds": acquisitions; working capital; capital expenditures; repayment of debt; and repurchases and redemptions of securities. I continue to believe that an acquisition of BJ Services makes a lot of sense to me.
Bill Bonner: "The problem is not illiquidity, it’s insolvency – caused by too much credit, not too little. People, businesses, nations – debtors owe more than they can repay. Borrowing more may postpone the crisis...maybe even disguise it; it cannot solve it.
Chesapeake Energy will cut 6% of its natural gas output due to low prices.
Wal-Mart's August sales at stores open at least one year rose 3.1%. Including the impact of fuel sales same-store sales rose 3%. The company expects same-store sales of its U.S. operations for the September period to be between 1% and 3%. With the stock at $42+, one might consider buying the stock and selling a $45 call against the purchase. That seems like a low risk strategy to me.
The European Central Bank, on a day in which it injected $57 billion (42 billion euros) into the banking system, held interest rates steady Thursday. The European Central Bank said that 526 million euros ($715 million) was borrowed at its marginal lending facility, which is akin to the Federal Reserve's discount window, at 5%. The ECB separately conducted a one-day tender.
Nordstrom Inc.'s August same-store sales rose 6.6%.
China lifted the reserve requirement ratio by 0.5-percentage points Thursday, forcing domestic banks to increase the amount of funds they must set aside as reserves in relation to loans for the seventh time this year. Starting Sept. 25, banks must set aside 12.5% of deposits as reserves, the People's Bank of China said on its Website Thursday. The central bank statement said the policy change was targeted at "strengthening liquidity management in the banking system and checking excessive money and credit growth".
The Bank of England said it's too soon to tell how the disruption in financial markets will impair the availability of credit to companies and households, as it kept its key interest rate on hold at 5.75%.
Nippon Steel, the world's second-largest maker of the alloy, lifted its sales forecast for the fiscal year ending March 30 to 4.8 trillion yen, an increase of 0.8% from 4.76 trillion yen forecast earlier, the company said in a statement posted on its Website. The steel maker intends to pay an interim dividend of 5 yen per share, up from 4 yen a year earlier. Nippon Steel also said it would lift its first-half net profit forecast to 170 billion yen from 160 billion yen.
Monster Worldwide Inc.'s online-recruitment index showed its lowest-ever annual growth rate in August, "a further indication of softening employer demand for labor," the online recruiter said. The index rose 3 points in August from July, to 186, reflecting "a slight rebound" in the availability of jobs online across a majority of industries, occupations and regions. The index sat at 173 in August 2006. The index rise was smaller than usual for August and reduced the index's annual growth pace to roughly 7.5%, the lowest on record.
Anglo-Australian miner BHP Billiton and Brazilian miner Companhia Vale do Rio Doce, or CVRD, may team up to launch a takeover bid for mining rival Rio Tinto, according to reports citing market rumors.
Jeremy Grantham: "Even if the credit crunch passes without a major catastrophe, the prices of stocks, bonds and real estate have a long way to fall."
Thomas P. Au: "When Bill Gross of Pimco shocked the investment world by estimating the value of the Dow at 5000 in 2002, he was probably referring to its bond value. My own estimate of this metric, updated to 2007, is something like 6700. In a 1930s scenario, blue chip stocks won’t go to zero, but they will fall to the point where they (collectively) yield more on dividends than Treasury bonds will yield in interest. Then stocks will be trading like bonds, having lost all of the option premiums that characterized their valuations during the period of general belief in the new economy. And in worst case situations like 1932 and 1974, the Dow went to about half of its bond value, a valuation that would put it between 3000 and 3500."
The Energy Insider: "Solar costs about 25 cents a kilowatt hour. That's compared to about 9 cents a kilowatt hour for natural gas and 5 cents a kilowatt hour for modern coal-burning plants, as well as 6 cents a kilowatt hour for wind energy if tax considerations are included. The good news is that the cost of solar power is falling all the time. It once stood at $1 a kilowatt hour and advocates say that it could soon cost 12-16 cents a kilowatt hour."
Investment banks need to restore investor confidence by making a concerted effort to reveal the full extent of any losses arising from the credit market turmoil, Josef Ackermann, chief executive of Deutsche Bank, has urged. Mr Ackermann said investors lacked confidence in the financial markets and in the banking sector because they were uncertain of the size and location of the losses. He said investment banks should provide clarity by valuing their credit exposure to current market levels.
According to the FT, Kazakhstan on Thursday demanded greater control over the giant Kashagan oilfield in the Caspian Sea on Thursday, complaining that inadequate management of the project by a foreign consortium led by Italy’s Eni had damaged the Central Asian republic’s economy and reputation as a reliable global energy supplier. Karim Massimov, Kazakh prime minister, said that KazMunaigas, the state oil company, should be appointed as co-operator at Kashagan where Eni had proved “incapable of fulfilling some of its obligations. KazMunaigas currently holds an 8.33 per cent interest in Kashagan alongside partners Eni, Shell, ExxonMobil, Total, ConocoPhillips and Inpex of Japan.
Biogen Idec sees FY non-GAAP EPS $2.60 to $2.70.
The Reserve Bank of Australia has widened the range of securities it’s willing to buy in so-called repurchase agreements in order to boost the amount of money available in the nation’s banking system.
Countrywide Financial is laying off another 900 employees as a result of decreased lending and increased defaults resulting from the worst U.S. housing slump in two decades.
India's Ranbaxy Laboratories has submitted a preliminary bid for U.S.-based Bradley Pharmaceuticals, the Economic Times reported on Thursday, citing a source close to the development. Indian media had earlier reported Hyderabad-based Dr Reddy's Laboratories was in the race for Bradley.
Target Corp. expects September sales at stores open at least one year to rise in a range of 4% to 6%. Its August same-store sales rose 6.1%
Unit labor costs increased at a 1.4% annual rate, down from the earlier estimate of 2.1%. Over the past four quarters, the output per hour of American businesses has increased 0.9%, up from the initial estimate of a 0.6% rise. Unit labor costs was up 4.9% over the past year, the fastest pace since the third quarter of 2000.
The number of initial claims in the week ending September 1 fell 19,000 to 318,000. It's the lowest level since the week ended Aug. 4.
Credit derivatives awarded the top ratings by Moody's Investors Service and Standard & Poor's may be as vulnerable to default as high-risk, high-yield bonds, according to independent research firm CreditSights Inc.
According to the Morgage Bankers Association's quarterly delinquency survey, a seasonally adjusted 0.65% of loans on one- to four-unit residential properties entered the foreclosure process during the period, the highest level in the survey's 55-year history. In the first quarter, when the previous record was set, 0.58% of loans entered the process; a year ago, 0.43% entered the process.
The ISM non-manufacturing index was unchanged at 55.8% in August.
U.S. natural gas supply up 36 bln cubic feet: Energy Dept.
The American Petroleum Institute reported a fall of 4.8 million barrels in crude supplies for the week ended August 31. The Energy Department had reported a decline of 3.9 million barrels for the latest week. Motor gasoline supplies were up 1.6 million barrels, the API said. The government reported that supplies were down 1.5 million barrels. Distillate supplies climbed 3.3 million barrels, the API said. They were up 2.3 million barrels, according to the Energy Department.
The outstanding volume of commercial paper fell by $54.1 billion to $1.93 trillion, or 2.7%, last week, the Fed reported Thursday. Outstanding paper dropped by a record $259 billion, or 11.9%, in August.
Syria has said its air defenses opened fire on Israeli warplanes after they violated its airspace in the north of the country.
Dallas Fed President Richard Fisher said recent economic data has been "rather positive," and pointed specifically to the August ISM services index, which was unchanged at 55.8%. Fisher said anecdotal reports from throughout his district and across the country point to "a labor shortage." "People are having trouble finding everything from day workers to bank tellers," Fisher said. "The good news is the financial turmoil that we have recently seen came against a background of a very strong economy. I don't see the dynamics of that growth changing overnight," he said.
October crude climbed 57 cents to close at $76.30 a barrel Thursday. December natural gas retreated from a high near $6 to close at $5.65 per million British thermal units, down 2.7%.
December gold climbed $13.90, or 2%, Thursday to close at $704.60 an ounce. December silver gained 17.8 cents, or 1.4%, to finish at $12.533 an ounce and December copper tacked on 1.2% to close at $3.3025 a pound.
Atlanta Fed President Dennis Lockhart: "So far, I have not seen hard or soft data that provide conclusive signs that housing problems are spilling over into the broad economy."
Baker Hughes Inc. filed to sell up to $2 Billion in a mixed securities. The "Use of Proceeds": acquisitions; working capital; capital expenditures; repayment of debt; and repurchases and redemptions of securities. I continue to believe that an acquisition of BJ Services makes a lot of sense to me.
Wednesday, September 05, 2007
Conduits
9/6/07 Conduits
The London interbank offered rate, or Libor, increased to 5.72 percent, the highest since January 2001, from 5.70 percent yesterday and 5.36 percent at the end of July, the British Bankers' Association said. Other short-term rates also rose, including the three-month rate for the euro, which climbed to 4.76 percent from 4.75 percent, its highest since 2001.
Boeing's first Dreamliner 787 flight might be pushed back until November. There are continue delays in building the plane. The fact is the company does not have the necessary fasteners.
The WSJ reports that the housing slump strains budgets for states and cities. It has cut into fees, taxes, and other related income.
Yahoo agreed to buy online advertising company BlueLithium for about $300 million. BlueLithium is the fifth largest ad network in the US and second largest in the UK with 145 million unique visitors each month.
"Higher Libor rates affect the whole economy by tightening the budgets of borrowers large and said small," said Lou Crandall, chief economist with Wrightson ICAP in NY.
BlackRock's Larry Fink: "I don't believe the Federal Reserve should ease. It's a foolish, foolish statement for people to make with the economy performing in line with the Fed's current forecast. It's a good thing for regulators to see risk premiums become more appropriate."
Forbes: "As lenders tighten their standards more Americans chose to rent, not own. That's good news for landlords."
Minyanville: "Remember, the dollar is not backed by real money, but by debt. When that debt is destroyed, the dollar becomes worth much less.
This is when gold will rise precipitously against the dollar and other currencies as well. Those currencies backed by real savings will do relatively better."
WSJ: "Though few investors realize it, banks such as Citigroup Inc. could find themselves burdened by affiliated investment vehicles that issue tens of billions of dollars in short-term debt known as commercial paper. The investment vehicles, known as "conduits" and SIVs, are designed to operate separately from the banks and off their balance sheets. Citigroup, for example, owns about 25% of the market for SIVs, representing nearly $100 billion of assets under management. The largest Citigroup SIV is Centauri Corp., which had $21 billion in outstanding debt as of February 2007, according to a Citigroup research report. There is no mention of Centauri in its 2006 annual filing with the Securities and Exchange Commission."
Citigroup Inc. will close its $2.4 billion Tribeca hedge fund and return money to clients five months after it agreed to buy investment manager Old Lane LP, which uses a similar strategy.
Greg IP: "Federal and state banking regulators urged lenders and investors to restructure the loans of millions of borrowers at risk of losing their homes as their adjustable-rate mortgages reset to a higher rate. Lenders should "review to determine the full extent of their authority to identify borrowers at risk of default" and find a way to keep the borrower in a home, the regulatory bodies said in a joint statement."
According to the FT, market turmoil and the woes in the US subprime mortgage market will crimp world economic growth this year, the Organisation of Economic Co-Operation and Development said on Wednesday, as it called for better regulation to address the “serious imperfections” in US housing markets and credit markets worldwide.
Costco Wholesale Corp. said Wednesday its August same-store sales rose 2 percent primarily on strong international sales. For the month, international same-store sales increased 8 percent while U.S. same-store sales edged up 1 percent.
U.K. consumer confidence fell to a four-month low in August as Britons became less willing to spend after interest rates rose, Nationwide Building Society said.
Canadian Pacific Railway Ltd has agreed to buy the Dakota, Minnesota & Eastern Railroad Corp for at least $1.5 billion cash to expand its network and increase access to U.S. Midwest markets. Canada's number two railway will expand by about 2,500 miles of track by acquiring DM&E, the largest U.S. regional railroad, from London-based Electra Private Equity , which originally invested in the company more than 20 years ago.
Cognos Inc.said Wednesday it'll pay $17.87 a share in cash to buy Applix Inc. in a deal valued at about $306 million net of Applix cash on hand.
The Bank of England said it's upped its aggregate reserves target by 6%, which it says should help to "relieve some pressure on interest rates for overnight borrowing which have, at times during the maintenance period over the past month, been unusually high relative to the bank rate."
Japanese bank minister Yoshimi Watanabe: "There is a risk that players who had invested by borrowing Japan's low interest rate currency would unwind such yen carry trades," he said, adding that he'll be watching Japanese banks on their exposure to U.S. subprime losses.
Announced lay-offs surged 85 percent to 79,459 in August from 42,897 in July, according to Challenger, Gray & Christmas Inc, an employment consulting firm. August's job cuts were the highest since February, when they totaled 84,014. "Nearly half of the August cuts came from the financial sector, as dozens of mortgage and subprime lenders caved under the pressure of a sinking housing market," Challenger, Gray & Christmas said in a statement. Financial job cuts totaled 35,752 in August, the highest monthly total for the industry since Challenger, Gray & Christmas began tracking in 1993, the firm said.
Mortgage insurer MGIC Investment Corp. won't proceed with its acquisition of credit risk management provider Radian Group Inc. because of the challenging conditions in the mortgage markets, the companies said Wednesday.
Prices of U.S. commercial real estate could fall up to 15% in what would be the worst decline since the 2001 recession, Bloomberg reported Wednesday. "People aren't willing to do deals right now," said Howard Michaels, chairman of Carlton Advisory Services. "The expectation is that prices will come down." In July, investors bought the fewest commercial properties in almost a year and apartment building purchases were down 50% from June. Last month, the Archstone-Smith Trust postponed its $13.5 billion sale to a group led by Tishman Speyer Properties until October. Mission West, which owns commercial properties in Silicon Valley, said two weeks ago that its $1.8 billion sale might collapse because a bank has withdrawn funding. "There are so many deals falling apart," said David Lichtenstein, CEO of commercial property owner Lightstone Group. "People who can get out are getting out." Morgan Stanley industry analyst Matthew Ostrower forecast that average prices for commercial properties could fall 5-15% in the next two years.
GM says it will sell a million cars in China this year. According to Reuters, the Chinese market will buy 8.5 million new cars this year, putting GM's share at 12%.
Since June, the amount of distressed bonds has risen more than fivefold to $24.8 billion, according to an index Merrill Lynch & Co. began compiling in 1997.
Wilfred Hahn: "Central banks are really not well equipped to fix liquidity (much less solvency) problems in the non-bank financial world. That's exactly where the major crises are hitting...Unfortunately, the wrong indicator is being observed. The crash was in credit markets, not equities. Assuredly, the effects of this crunch are now working their way into the real economy. As in a tsunami, the after waves must be anticipated. Usually, the second and third waves are the largest. Equity markets at present are therefore falsely comforted during this quiet period in between, even as the backwash has already carried out its first victims. Important to realize is that the financial market topography is very different from that which present-generation analysts are accustomed. To assume that just because stock markets may not have crashed as perhaps in October 1987, that therefore significant damage has not occurred to financial markets and future economic prospects is likely to be wrong...Much of North America's financial system now lies outside of the official monetary system...Therefore, the powers of the "lender of last resort" -- a central bank -- during a period of liquidity crisis are greatly diminished. Today, the member commercial banks of the 12 reserve districts of the US central monetary system represent only a small portion of total credit assets (now well less than a third.) Most credit, therefore, is manufactured outside of the banking system and is not subject to fractional reserve constraints. It is only banks that have access to the credit window of the Federal Reserve System...At the present time, virtually all indicators continue to confirm not only a continuing deleveraging process but also a broad-based consumer retrenchment. Coincident with the broader impact upon securitized credit structures, is a compression of the household sector balance sheet in the US. It is highly unlikely that this latter development is anywhere near ending in the foreseeable future. This is not a third-world debt situation. For now, at its very epicenter are the deteriorating balance sheets of the richest households in the world, who happen to live mostly in the largest economy in the world. We also conclude that complacency and confidence are still far too high. Given the nature of the forces at play and the extent of the damage to credit markets over the past month or so, it would be a serious error to gloss over realities with simple and optimistic "happy talk."
Employee confidence plunged in August, falling to the lowest level since Hurricane Katrina hit, according to the Hudson employment index released Wednesday. The Hudson index fell by 6.6 points (the most ever) to 99.2. "August's business news took a heavy toll on workers' perceptions of their finances," Hudson said. The percentage of workers who said their finances were improving fell from 43% to 37%. Employees were also slightly more concerned about layoffs at their company and about losing their own job. "With news of dramatic declines in stock averages and continued downturns in the housing and mortgage markets, August proved to be an incredibly tough month on workers' psyches," said Robert Morgan, president of Talent Solutions at Hudson, a recruiting company.
Employment in the U.S. private sector grew by 38,000 in August, the weakest in four years, according to the ADP employment report released Wednesday. Adding in some 27,000 government jobs typically added but not covered by the ADP report, it suggests nonfarm payrolls grew by about 65,000. The goods-producing sector fell by 49,000 jobs in August, including 33,000 in manufacturing. The services sector added 87,000 jobs in August.
Demand from India, South Korea, Egypt, Taiwan and Japan is sapping global supplies of wheat. Australia said it may produce 29 percent less of the grain than expected.
No one was in favor of cutting the Federal Reserve's discount lending rate during a key Fed meeting on Aug. 6, just 11 days before it did cut the rate in an emergency move, according to a meeting summary released Tuesday.
Tyson foods now expects full-year 2007 EPS of $0.72-0.80, down from its previous guidance of $0.82-0.90.
Contract signings on existing homes fell by 12.2% in July -- the largest drop since the pending homes sales index started in 2001, the National Association of Realtors reported Wednesday. The index hit its lowest level since September 2001. Pending sales are 16.1% below July 2006.
Wal-Mart traded at a new 52-week low on Wednesday.
Home Depot Inc.'s Chief Executive Frank Blake characterized the rest of 2007 as "tough," and said much of 2008 will "face headwinds."
Petraeus, in an interview with ABC News, signaled he was looking at March for reducing troop levels.
John Dugan, Comptroller of the Currency: "The worst problems we have seen in the markets ... have occurred outside the commercial banking sector."
A B-52 bomber mistakenly loaded with five nuclear warheads flew from Minot Air Force Base, N.D, to Barksdale Air Force Base, La., on Aug. 30, resulting in an Air Force-wide investigation, according to three officers who asked not to be identified because they were not authorized to discuss the incident.
Dick Cheney has ordered top Neo-Con media outlets, including Fox News and the Wall Street Journal, to unleash a PR blitz to sell a war with Iran from today, according to Barnett Rubin, the highly respected Afghanistan expert at New York University. The New Yorker magazine reports that Rubin had a conversation with a member of a top neoconservative institution in Washington, who told him that "instructions" had been passed on from the Office of the Vice-President to roll out a campaign for war with Iran in the week after Labor Day.
Starbucks Corp. expects dairy prices to be a "negative" in 2008. Peter Bocian, Starbucks' executive vice president and chief financial officer backed the company's fiscal 2007 profit forecast in the range of 87 cents to 89 cents a share and net revenue growth of about 20%. He said hitting the high end of the range will be "challenging." For fiscal 2008, the company also said it expects revenue growth of about 18%.
October crude climbed 65 cents to close at $75.73 a barrel Wednesday. October natural gas gained 3.1%, or 17.6 cents to finish at $5.805 per million British thermal units.
December gold fell 80 cents to close at $690.70 an ounce Wednesday. December silver fell 9.3 cents to close at $12.355 an ounce. December copper was the biggest loser, down 4.3 cents, or 1.3%, to close at $3.263 a pound.
"Outside of real estate, reports that the turmoil in financial markets had affected economic activity during the survey period were limited," the Fed said in the survey, which concluded before Aug. 27. "Economic activity has continued to expand nationwide", the Fed said.
On Wednesday there were few bright spots in the equity market. In particular, the financial sectors weakness stood out.
The London interbank offered rate, or Libor, increased to 5.72 percent, the highest since January 2001, from 5.70 percent yesterday and 5.36 percent at the end of July, the British Bankers' Association said. Other short-term rates also rose, including the three-month rate for the euro, which climbed to 4.76 percent from 4.75 percent, its highest since 2001.
Boeing's first Dreamliner 787 flight might be pushed back until November. There are continue delays in building the plane. The fact is the company does not have the necessary fasteners.
The WSJ reports that the housing slump strains budgets for states and cities. It has cut into fees, taxes, and other related income.
Yahoo agreed to buy online advertising company BlueLithium for about $300 million. BlueLithium is the fifth largest ad network in the US and second largest in the UK with 145 million unique visitors each month.
"Higher Libor rates affect the whole economy by tightening the budgets of borrowers large and said small," said Lou Crandall, chief economist with Wrightson ICAP in NY.
BlackRock's Larry Fink: "I don't believe the Federal Reserve should ease. It's a foolish, foolish statement for people to make with the economy performing in line with the Fed's current forecast. It's a good thing for regulators to see risk premiums become more appropriate."
Forbes: "As lenders tighten their standards more Americans chose to rent, not own. That's good news for landlords."
Minyanville: "Remember, the dollar is not backed by real money, but by debt. When that debt is destroyed, the dollar becomes worth much less.
This is when gold will rise precipitously against the dollar and other currencies as well. Those currencies backed by real savings will do relatively better."
WSJ: "Though few investors realize it, banks such as Citigroup Inc. could find themselves burdened by affiliated investment vehicles that issue tens of billions of dollars in short-term debt known as commercial paper. The investment vehicles, known as "conduits" and SIVs, are designed to operate separately from the banks and off their balance sheets. Citigroup, for example, owns about 25% of the market for SIVs, representing nearly $100 billion of assets under management. The largest Citigroup SIV is Centauri Corp., which had $21 billion in outstanding debt as of February 2007, according to a Citigroup research report. There is no mention of Centauri in its 2006 annual filing with the Securities and Exchange Commission."
Citigroup Inc. will close its $2.4 billion Tribeca hedge fund and return money to clients five months after it agreed to buy investment manager Old Lane LP, which uses a similar strategy.
Greg IP: "Federal and state banking regulators urged lenders and investors to restructure the loans of millions of borrowers at risk of losing their homes as their adjustable-rate mortgages reset to a higher rate. Lenders should "review to determine the full extent of their authority to identify borrowers at risk of default" and find a way to keep the borrower in a home, the regulatory bodies said in a joint statement."
According to the FT, market turmoil and the woes in the US subprime mortgage market will crimp world economic growth this year, the Organisation of Economic Co-Operation and Development said on Wednesday, as it called for better regulation to address the “serious imperfections” in US housing markets and credit markets worldwide.
Costco Wholesale Corp. said Wednesday its August same-store sales rose 2 percent primarily on strong international sales. For the month, international same-store sales increased 8 percent while U.S. same-store sales edged up 1 percent.
U.K. consumer confidence fell to a four-month low in August as Britons became less willing to spend after interest rates rose, Nationwide Building Society said.
Canadian Pacific Railway Ltd has agreed to buy the Dakota, Minnesota & Eastern Railroad Corp for at least $1.5 billion cash to expand its network and increase access to U.S. Midwest markets. Canada's number two railway will expand by about 2,500 miles of track by acquiring DM&E, the largest U.S. regional railroad, from London-based Electra Private Equity , which originally invested in the company more than 20 years ago.
Cognos Inc.said Wednesday it'll pay $17.87 a share in cash to buy Applix Inc. in a deal valued at about $306 million net of Applix cash on hand.
The Bank of England said it's upped its aggregate reserves target by 6%, which it says should help to "relieve some pressure on interest rates for overnight borrowing which have, at times during the maintenance period over the past month, been unusually high relative to the bank rate."
Japanese bank minister Yoshimi Watanabe: "There is a risk that players who had invested by borrowing Japan's low interest rate currency would unwind such yen carry trades," he said, adding that he'll be watching Japanese banks on their exposure to U.S. subprime losses.
Announced lay-offs surged 85 percent to 79,459 in August from 42,897 in July, according to Challenger, Gray & Christmas Inc, an employment consulting firm. August's job cuts were the highest since February, when they totaled 84,014. "Nearly half of the August cuts came from the financial sector, as dozens of mortgage and subprime lenders caved under the pressure of a sinking housing market," Challenger, Gray & Christmas said in a statement. Financial job cuts totaled 35,752 in August, the highest monthly total for the industry since Challenger, Gray & Christmas began tracking in 1993, the firm said.
Mortgage insurer MGIC Investment Corp. won't proceed with its acquisition of credit risk management provider Radian Group Inc. because of the challenging conditions in the mortgage markets, the companies said Wednesday.
Prices of U.S. commercial real estate could fall up to 15% in what would be the worst decline since the 2001 recession, Bloomberg reported Wednesday. "People aren't willing to do deals right now," said Howard Michaels, chairman of Carlton Advisory Services. "The expectation is that prices will come down." In July, investors bought the fewest commercial properties in almost a year and apartment building purchases were down 50% from June. Last month, the Archstone-Smith Trust postponed its $13.5 billion sale to a group led by Tishman Speyer Properties until October. Mission West, which owns commercial properties in Silicon Valley, said two weeks ago that its $1.8 billion sale might collapse because a bank has withdrawn funding. "There are so many deals falling apart," said David Lichtenstein, CEO of commercial property owner Lightstone Group. "People who can get out are getting out." Morgan Stanley industry analyst Matthew Ostrower forecast that average prices for commercial properties could fall 5-15% in the next two years.
GM says it will sell a million cars in China this year. According to Reuters, the Chinese market will buy 8.5 million new cars this year, putting GM's share at 12%.
Since June, the amount of distressed bonds has risen more than fivefold to $24.8 billion, according to an index Merrill Lynch & Co. began compiling in 1997.
Wilfred Hahn: "Central banks are really not well equipped to fix liquidity (much less solvency) problems in the non-bank financial world. That's exactly where the major crises are hitting...Unfortunately, the wrong indicator is being observed. The crash was in credit markets, not equities. Assuredly, the effects of this crunch are now working their way into the real economy. As in a tsunami, the after waves must be anticipated. Usually, the second and third waves are the largest. Equity markets at present are therefore falsely comforted during this quiet period in between, even as the backwash has already carried out its first victims. Important to realize is that the financial market topography is very different from that which present-generation analysts are accustomed. To assume that just because stock markets may not have crashed as perhaps in October 1987, that therefore significant damage has not occurred to financial markets and future economic prospects is likely to be wrong...Much of North America's financial system now lies outside of the official monetary system...Therefore, the powers of the "lender of last resort" -- a central bank -- during a period of liquidity crisis are greatly diminished. Today, the member commercial banks of the 12 reserve districts of the US central monetary system represent only a small portion of total credit assets (now well less than a third.) Most credit, therefore, is manufactured outside of the banking system and is not subject to fractional reserve constraints. It is only banks that have access to the credit window of the Federal Reserve System...At the present time, virtually all indicators continue to confirm not only a continuing deleveraging process but also a broad-based consumer retrenchment. Coincident with the broader impact upon securitized credit structures, is a compression of the household sector balance sheet in the US. It is highly unlikely that this latter development is anywhere near ending in the foreseeable future. This is not a third-world debt situation. For now, at its very epicenter are the deteriorating balance sheets of the richest households in the world, who happen to live mostly in the largest economy in the world. We also conclude that complacency and confidence are still far too high. Given the nature of the forces at play and the extent of the damage to credit markets over the past month or so, it would be a serious error to gloss over realities with simple and optimistic "happy talk."
Employee confidence plunged in August, falling to the lowest level since Hurricane Katrina hit, according to the Hudson employment index released Wednesday. The Hudson index fell by 6.6 points (the most ever) to 99.2. "August's business news took a heavy toll on workers' perceptions of their finances," Hudson said. The percentage of workers who said their finances were improving fell from 43% to 37%. Employees were also slightly more concerned about layoffs at their company and about losing their own job. "With news of dramatic declines in stock averages and continued downturns in the housing and mortgage markets, August proved to be an incredibly tough month on workers' psyches," said Robert Morgan, president of Talent Solutions at Hudson, a recruiting company.
Employment in the U.S. private sector grew by 38,000 in August, the weakest in four years, according to the ADP employment report released Wednesday. Adding in some 27,000 government jobs typically added but not covered by the ADP report, it suggests nonfarm payrolls grew by about 65,000. The goods-producing sector fell by 49,000 jobs in August, including 33,000 in manufacturing. The services sector added 87,000 jobs in August.
Demand from India, South Korea, Egypt, Taiwan and Japan is sapping global supplies of wheat. Australia said it may produce 29 percent less of the grain than expected.
No one was in favor of cutting the Federal Reserve's discount lending rate during a key Fed meeting on Aug. 6, just 11 days before it did cut the rate in an emergency move, according to a meeting summary released Tuesday.
Tyson foods now expects full-year 2007 EPS of $0.72-0.80, down from its previous guidance of $0.82-0.90.
Contract signings on existing homes fell by 12.2% in July -- the largest drop since the pending homes sales index started in 2001, the National Association of Realtors reported Wednesday. The index hit its lowest level since September 2001. Pending sales are 16.1% below July 2006.
Wal-Mart traded at a new 52-week low on Wednesday.
Home Depot Inc.'s Chief Executive Frank Blake characterized the rest of 2007 as "tough," and said much of 2008 will "face headwinds."
Petraeus, in an interview with ABC News, signaled he was looking at March for reducing troop levels.
John Dugan, Comptroller of the Currency: "The worst problems we have seen in the markets ... have occurred outside the commercial banking sector."
A B-52 bomber mistakenly loaded with five nuclear warheads flew from Minot Air Force Base, N.D, to Barksdale Air Force Base, La., on Aug. 30, resulting in an Air Force-wide investigation, according to three officers who asked not to be identified because they were not authorized to discuss the incident.
Dick Cheney has ordered top Neo-Con media outlets, including Fox News and the Wall Street Journal, to unleash a PR blitz to sell a war with Iran from today, according to Barnett Rubin, the highly respected Afghanistan expert at New York University. The New Yorker magazine reports that Rubin had a conversation with a member of a top neoconservative institution in Washington, who told him that "instructions" had been passed on from the Office of the Vice-President to roll out a campaign for war with Iran in the week after Labor Day.
Starbucks Corp. expects dairy prices to be a "negative" in 2008. Peter Bocian, Starbucks' executive vice president and chief financial officer backed the company's fiscal 2007 profit forecast in the range of 87 cents to 89 cents a share and net revenue growth of about 20%. He said hitting the high end of the range will be "challenging." For fiscal 2008, the company also said it expects revenue growth of about 18%.
October crude climbed 65 cents to close at $75.73 a barrel Wednesday. October natural gas gained 3.1%, or 17.6 cents to finish at $5.805 per million British thermal units.
December gold fell 80 cents to close at $690.70 an ounce Wednesday. December silver fell 9.3 cents to close at $12.355 an ounce. December copper was the biggest loser, down 4.3 cents, or 1.3%, to close at $3.263 a pound.
"Outside of real estate, reports that the turmoil in financial markets had affected economic activity during the survey period were limited," the Fed said in the survey, which concluded before Aug. 27. "Economic activity has continued to expand nationwide", the Fed said.
On Wednesday there were few bright spots in the equity market. In particular, the financial sectors weakness stood out.
Expectations
9/5/07 Expectations
Jean-Pierre Mustier, chief executive of corporate and investment banking at Société Générale, said investors were in the grip of an “irrational mistrust” of credit ratings.(The proof will be in the pudding.)
The Semiconductor Industry Association said in a statement that despite severe competition in the sector in the early part of the year, worldwide chip sales were on track with its forecast of 1.8 percent growth in 2007.
John Hussman: " As with tech stocks in 2000, it may take some time before Wall Street's expectations catch up with the reality that profit margins are cyclical and that early declines off of overvalued peaks do not constitute bargains. My impression is that in the next year or two, we will observe at least one quarter, and more likely a full year, in which the entire profit of the U.S. banking sector is consumed by loan losses...As of June 30, 2007, the net income of all FDIC insured banking institutions totaled $36.8 billion. At an annual rate, that represents about 2% of all loans outstanding. Meanwhile, net charge-offs for bad loans were already running at an annual rate of about 0.50% in June. That's in a strong economy, before the recent problems, and loan loss reserves didn't even budge from a 32-year low. Net charge offs could easily quadruple in a mild recession...Historically, strong buying points for financial stocks have generally occurred when the group has traded at about book value. Currently, the typical multiples are two and often three times that level. That isn't to imply that financials must retreat to those lower valuations in this instance, but it's important to recognize that many financials are only “cheap” based on comparisons with very recent norms, and on the assumption that the high profitability levels of recent years will be sustained indefinitely."
Franklin Templeton Investments, which manages $621 billion in assets, has bought 25 percent of Dubai's Algebra Capital Ltd and wants to grow its business in Arab markets, it said on Tuesday. Algebra expects the value of assets in the professionally managed funds in the Middle East and North Africa to triple over the next five years to more than $200 billion, it said in a statement announcing the deal.
Merrill Lynch cut earnings estimates on 12 of 15 services stocks it covers, as its economists see a 65% chance of a U.S. recession.
Australia's economy expanded 0.9% in the second quarter from the first, beating out economists' forecasts for a 0.6% rise on a quarterly basis, driven by household consumption and construction spending. The economy expanded 4.3% in the quarter from a year earlier, the fastest pace in three years, the Australian Bureau of Statistics said Tuesday.
Natural gas is trading in the UK at $5.52 a million British thermal units. A therm is 100,000 Btus, while in the early Tuesday pits in the U.S. we are seeing trading at $5.26.
Allan Sloan: "Don't believe the hype: The deficit is much bigger than you think. There will be lots of celebrating in Washington next month when the Treasury announces that the federal budget deficit for fiscal 2007, which ends Sept. 30, will have dropped to a mere $158 billion, give or take a few bucks. That will be $90 billion below the reported 2006 deficit, and will be toasted by the White House and Treasury as a great accomplishment. But I have a nasty little secret for you, folks: If you use realistic numbers rather than what I call WAAP -- Washington accepted accounting principles -- the real federal deficit for this fiscal year is more than 2 1/2 times the stated deficit." Why am I not surprised?
Russia’s government may raise its forecast for economic growth in 2007 by the end of September, citing Economy Minister German Gref.
The three-bank consortium led by the Royal Bank of Scotland might invoke a material adverse change [MAC] clause and lower its offer for Dutch bank ABN Amro, the Times of London reported Tuesday.
The economic expansion that began six years ago has failed to benefit most workers, according to a report from the nonpartisan Economic Policy Institute, released Monday. After rising quickly in the second half of the 1990s, most workers real wages have been stagnant in the 2000s, especially since 2003.
"It's no secret that many customers are running out of money by the end of the month," Wal-Mart Chief Executive Lee Scott said. "The paycheck cycle is more pronounced now than it's ever been."
According to the FT, a continuing liquidity crunch in Canada’s asset-backed commercial paper market is triggering a sharp contraction in the availability of credit, threatening to cut short the economy’s robust growth.
Lehman Brothers on Tuesday began a three-day energy conference in New York. Companies presenting at the conference include: Patterson-UTI Energy Inc., Xcel Energy Inc., Anadarko Petroleum Corp., Noble Energy Inc., Quicksilver Resources Inc., Marathon Oil Corp., El Paso Corp., Questar Corp., Peabody Energy Corp., Duke Energy Corp., BJ Services Co. and Exxon Mobil Corp.
First American to cut full-time workforce by 1,300 in Q3.
Copper, lead, zinc, and aluminum had big down days in early Tuesday trading. In fact, zinc was at a 14-month low. On the other hand, soybeans are trading over $9 a bushel, wheat is over $8 a bushel, and corn is trading at $3.44. As we approach Fall, heating oil is $2.07 a gallon.
Discount wireless phone service provider MetroPCS Communications Inc. on Tuesday offered to buy rival Leap Wireless International Inc. in a stock deal valued at about $5.12 billion. MetroPCS, which offers prepaid phone plans, said it would also assume or refinance $2 billion of Leap debt as part of the transaction.The company offered to pay 2.75 shares of its stock for each share of Leap.
MEMC Electronic Materials cut its revenue guidance for the third-quarter due to a construction incident last week at a polysilicon plant undergoing an expansion in Texas. MEMC said it expects Q3 revenue to be about 5% less than its prior forecast of $500 million.
Home Depot said it will buy back about 289.6 million shares at $37 each, based on the preliminary results of Dutch auction tender. The price is at the low end of its $37 to $42 range.
U.S. Aug. ISM manufacturing index 52.9% vs 53.8% in July. New orders fell to 55.3% in August from 57.5% in July. The employment index rose to 51.3% from 50.2%. The price index fell to 63.0% from 65.0%.
Spending on U.S. construction projects fell 0.4% in July to an annual rate of $1.17 trillion, with a 1.4% decline in spending on private residential projects leading the way, the Commerce Department reported Tuesday. Compared to this time last year, construction spending is off 2%. During the first seven months of 2007, construction spending was 3.4% below the same period in 2006.
The U.S. Federal Reserve said on Tuesday it added $5 billion of temporary reserves to the banking system through 2-day repurchase agreements. The Fed said the collateral accepted on the 2-day repurchase was made up of $4.125 billion of Treasuries and $875 million of agencies. A total of $42.9 billion in bids were submitted for the 2-day repurchase.
A Bear Stearns analyst named Yahoo a "top pick," saying strategic initiatives are likely to boost shares. Analyst Robert S. Peck, in a client note, kept an "Outperform" rating and $30 target price on shares.
NovaStar Financial Inc. canceled a rights offering designed to raise $101.2 million for the subprime mortgage lender and said its auditor expressed doubt about the company's survival.
Michael E. Lewitt: "Investors and lenders convinced themselves that financial alchemy would turn illiquid securities into liquid securities in all market conditions. But leverage and liquidity require two participants. A borrower needs a lender, and a buyer needs a seller. Otherwise each is just a ship at sea. Liquidity is a human phenomenon, a psychological phenomenon. Investors made the mistake of believing that financial technology had repealed the laws of human nature. But, as Bill Gross wisely pointed out in his September Investment Commentary, "[n]othing within the current marketplace allows for the hedging of liquidity risk and that is the problem at the moment."5 This point is so obvious that it can be overlooked. Wall Street spends so much of its intellectual and financial resources trying to figure out how to hedge every kind of risk it can imagine. But the one kind of risk that repeatedly brings down markets and the biggest and boldest players in those markets is liquidity risk. The only true hedge against liquidity risk would be to cut out man's greed gland. You can't hedge human nature."
iSuppli said that the iPhone was the top-selling smart phone in the U.S. in July, accounting for 1.8% of all U.S. mobile-handset sales during the month. ISuppli now estimates Apple will sell 4.5 million iPhones in 2007, with that figure rising to more than 30 million by 2011.
December gold climbed $9.60 to close at $691.50 an ounce Tuesday.. December silver was also up 1.8%, or 21.8 cents, to close at $12.448 an ounce, but December copper closed at $3.306 a pound, down 2.7%.
The Government Accountability Office determined that four benchmarks — instead of two — had been partially met. But the GAO stuck with its original contention that only three goals out of the 18 had been achieved. The goals met include establishing joint security stations in Baghdad, ensuring minority rights in the Iraqi legislature and creating support committees for the Baghdad security plan.
Forecasters at Colorado State University said the rest of the 2007 Atlantic hurricane season would be busy. They expect three major hurricanes to form in the Atlantic Ocean from September through November, maintaining an earlier outlook.The Atlantic hurricane season began June 1 and ends Nov. 30. The peak of the season is typically between mid-August and mid- October. Two significant hurricanes have formed so far.
October crude climbed 1.4%, or $1.04, to close at a one-month high of $75.08 a barrel Tuesday. Natural gas reversed course and closed up 24 cents at $5.71.
Retail diesel fuel has increased 9.3 percent this year, to an average of $2.93 a gallon as of yesterday, according to the American Automobile Association.
In an SEC filing, Berkshire Hathaway Inc. said it may raise its stake in Burlington Northern Santa Fe Corp. to 25 percent or more from the present 15% level.
Epictetus: “We cannot choose our external circumstances, but we can always choose how we respond to them.”
Jean-Pierre Mustier, chief executive of corporate and investment banking at Société Générale, said investors were in the grip of an “irrational mistrust” of credit ratings.(The proof will be in the pudding.)
The Semiconductor Industry Association said in a statement that despite severe competition in the sector in the early part of the year, worldwide chip sales were on track with its forecast of 1.8 percent growth in 2007.
John Hussman: " As with tech stocks in 2000, it may take some time before Wall Street's expectations catch up with the reality that profit margins are cyclical and that early declines off of overvalued peaks do not constitute bargains. My impression is that in the next year or two, we will observe at least one quarter, and more likely a full year, in which the entire profit of the U.S. banking sector is consumed by loan losses...As of June 30, 2007, the net income of all FDIC insured banking institutions totaled $36.8 billion. At an annual rate, that represents about 2% of all loans outstanding. Meanwhile, net charge-offs for bad loans were already running at an annual rate of about 0.50% in June. That's in a strong economy, before the recent problems, and loan loss reserves didn't even budge from a 32-year low. Net charge offs could easily quadruple in a mild recession...Historically, strong buying points for financial stocks have generally occurred when the group has traded at about book value. Currently, the typical multiples are two and often three times that level. That isn't to imply that financials must retreat to those lower valuations in this instance, but it's important to recognize that many financials are only “cheap” based on comparisons with very recent norms, and on the assumption that the high profitability levels of recent years will be sustained indefinitely."
Franklin Templeton Investments, which manages $621 billion in assets, has bought 25 percent of Dubai's Algebra Capital Ltd and wants to grow its business in Arab markets, it said on Tuesday. Algebra expects the value of assets in the professionally managed funds in the Middle East and North Africa to triple over the next five years to more than $200 billion, it said in a statement announcing the deal.
Merrill Lynch cut earnings estimates on 12 of 15 services stocks it covers, as its economists see a 65% chance of a U.S. recession.
Australia's economy expanded 0.9% in the second quarter from the first, beating out economists' forecasts for a 0.6% rise on a quarterly basis, driven by household consumption and construction spending. The economy expanded 4.3% in the quarter from a year earlier, the fastest pace in three years, the Australian Bureau of Statistics said Tuesday.
Natural gas is trading in the UK at $5.52 a million British thermal units. A therm is 100,000 Btus, while in the early Tuesday pits in the U.S. we are seeing trading at $5.26.
Allan Sloan: "Don't believe the hype: The deficit is much bigger than you think. There will be lots of celebrating in Washington next month when the Treasury announces that the federal budget deficit for fiscal 2007, which ends Sept. 30, will have dropped to a mere $158 billion, give or take a few bucks. That will be $90 billion below the reported 2006 deficit, and will be toasted by the White House and Treasury as a great accomplishment. But I have a nasty little secret for you, folks: If you use realistic numbers rather than what I call WAAP -- Washington accepted accounting principles -- the real federal deficit for this fiscal year is more than 2 1/2 times the stated deficit." Why am I not surprised?
Russia’s government may raise its forecast for economic growth in 2007 by the end of September, citing Economy Minister German Gref.
The three-bank consortium led by the Royal Bank of Scotland might invoke a material adverse change [MAC] clause and lower its offer for Dutch bank ABN Amro, the Times of London reported Tuesday.
The economic expansion that began six years ago has failed to benefit most workers, according to a report from the nonpartisan Economic Policy Institute, released Monday. After rising quickly in the second half of the 1990s, most workers real wages have been stagnant in the 2000s, especially since 2003.
"It's no secret that many customers are running out of money by the end of the month," Wal-Mart Chief Executive Lee Scott said. "The paycheck cycle is more pronounced now than it's ever been."
According to the FT, a continuing liquidity crunch in Canada’s asset-backed commercial paper market is triggering a sharp contraction in the availability of credit, threatening to cut short the economy’s robust growth.
Lehman Brothers on Tuesday began a three-day energy conference in New York. Companies presenting at the conference include: Patterson-UTI Energy Inc., Xcel Energy Inc., Anadarko Petroleum Corp., Noble Energy Inc., Quicksilver Resources Inc., Marathon Oil Corp., El Paso Corp., Questar Corp., Peabody Energy Corp., Duke Energy Corp., BJ Services Co. and Exxon Mobil Corp.
First American to cut full-time workforce by 1,300 in Q3.
Copper, lead, zinc, and aluminum had big down days in early Tuesday trading. In fact, zinc was at a 14-month low. On the other hand, soybeans are trading over $9 a bushel, wheat is over $8 a bushel, and corn is trading at $3.44. As we approach Fall, heating oil is $2.07 a gallon.
Discount wireless phone service provider MetroPCS Communications Inc. on Tuesday offered to buy rival Leap Wireless International Inc. in a stock deal valued at about $5.12 billion. MetroPCS, which offers prepaid phone plans, said it would also assume or refinance $2 billion of Leap debt as part of the transaction.The company offered to pay 2.75 shares of its stock for each share of Leap.
MEMC Electronic Materials cut its revenue guidance for the third-quarter due to a construction incident last week at a polysilicon plant undergoing an expansion in Texas. MEMC said it expects Q3 revenue to be about 5% less than its prior forecast of $500 million.
Home Depot said it will buy back about 289.6 million shares at $37 each, based on the preliminary results of Dutch auction tender. The price is at the low end of its $37 to $42 range.
U.S. Aug. ISM manufacturing index 52.9% vs 53.8% in July. New orders fell to 55.3% in August from 57.5% in July. The employment index rose to 51.3% from 50.2%. The price index fell to 63.0% from 65.0%.
Spending on U.S. construction projects fell 0.4% in July to an annual rate of $1.17 trillion, with a 1.4% decline in spending on private residential projects leading the way, the Commerce Department reported Tuesday. Compared to this time last year, construction spending is off 2%. During the first seven months of 2007, construction spending was 3.4% below the same period in 2006.
The U.S. Federal Reserve said on Tuesday it added $5 billion of temporary reserves to the banking system through 2-day repurchase agreements. The Fed said the collateral accepted on the 2-day repurchase was made up of $4.125 billion of Treasuries and $875 million of agencies. A total of $42.9 billion in bids were submitted for the 2-day repurchase.
A Bear Stearns analyst named Yahoo a "top pick," saying strategic initiatives are likely to boost shares. Analyst Robert S. Peck, in a client note, kept an "Outperform" rating and $30 target price on shares.
NovaStar Financial Inc. canceled a rights offering designed to raise $101.2 million for the subprime mortgage lender and said its auditor expressed doubt about the company's survival.
Michael E. Lewitt: "Investors and lenders convinced themselves that financial alchemy would turn illiquid securities into liquid securities in all market conditions. But leverage and liquidity require two participants. A borrower needs a lender, and a buyer needs a seller. Otherwise each is just a ship at sea. Liquidity is a human phenomenon, a psychological phenomenon. Investors made the mistake of believing that financial technology had repealed the laws of human nature. But, as Bill Gross wisely pointed out in his September Investment Commentary, "[n]othing within the current marketplace allows for the hedging of liquidity risk and that is the problem at the moment."5 This point is so obvious that it can be overlooked. Wall Street spends so much of its intellectual and financial resources trying to figure out how to hedge every kind of risk it can imagine. But the one kind of risk that repeatedly brings down markets and the biggest and boldest players in those markets is liquidity risk. The only true hedge against liquidity risk would be to cut out man's greed gland. You can't hedge human nature."
iSuppli said that the iPhone was the top-selling smart phone in the U.S. in July, accounting for 1.8% of all U.S. mobile-handset sales during the month. ISuppli now estimates Apple will sell 4.5 million iPhones in 2007, with that figure rising to more than 30 million by 2011.
December gold climbed $9.60 to close at $691.50 an ounce Tuesday.. December silver was also up 1.8%, or 21.8 cents, to close at $12.448 an ounce, but December copper closed at $3.306 a pound, down 2.7%.
The Government Accountability Office determined that four benchmarks — instead of two — had been partially met. But the GAO stuck with its original contention that only three goals out of the 18 had been achieved. The goals met include establishing joint security stations in Baghdad, ensuring minority rights in the Iraqi legislature and creating support committees for the Baghdad security plan.
Forecasters at Colorado State University said the rest of the 2007 Atlantic hurricane season would be busy. They expect three major hurricanes to form in the Atlantic Ocean from September through November, maintaining an earlier outlook.The Atlantic hurricane season began June 1 and ends Nov. 30. The peak of the season is typically between mid-August and mid- October. Two significant hurricanes have formed so far.
October crude climbed 1.4%, or $1.04, to close at a one-month high of $75.08 a barrel Tuesday. Natural gas reversed course and closed up 24 cents at $5.71.
Retail diesel fuel has increased 9.3 percent this year, to an average of $2.93 a gallon as of yesterday, according to the American Automobile Association.
In an SEC filing, Berkshire Hathaway Inc. said it may raise its stake in Burlington Northern Santa Fe Corp. to 25 percent or more from the present 15% level.
Epictetus: “We cannot choose our external circumstances, but we can always choose how we respond to them.”
Monday, September 03, 2007
Back To Work
9/4/07 Back To Work
HSBC agreed to buy 51 percent of Korea Exchange Bank from private equity firm Lone Star for $6.3 billion, in a deal that could propel the UK-based bank into the top ranks of Asia's third-largest banking market.
According to the WSJ, Franco-Belgian utility Suez and French state-controlled gas company Gaz de France Monday announced their long-awaited merger, creating a major natural-gas and energy supplier called GDF Suez of which the French state will hold a 35% stake. The new entity will have a combined stock market capitalization of 90 billion euros ($122 billion) and revenues of €72 billion. Suez will be absorbed by Gaz de France via an exchange rate of 21 GdF shares for 22 Suez shares, the companies said. The deal involves the partial spin-off of Suez's environment activities.
The current turmoil in the financial markets has all the characteristics of a classic banking crisis, but one that is taking place outside the traditional banking sector, Axel Weber, president of the Bundesbank, said at the weekend.“What we are seeing is basically what we see underlying all banking crises,” said Mr Weber.
According to the FT, Russia is considering a ban on cereals exports in a move that exacerbates fears that wheat prices, already at an all-time high, could surge further on reduced supplies, European cereal traders said. Russia, the world’s fifth largest wheat exporter, is concerned about rising local bread prices and inflation ahead of legislative elections in December.
The LA Times: "I think we're beginning to see a much broader range of options and opportunities for mature workers," said Diane Piktialis, a specialist in older-worker issues with the Conference Board, a business research organization in New York. "This is an area where there's just enormous room for creativity in terms of how companies can adapt." Concerns are particularly acute in the areas of manufacturing, healthcare and government.
In the 3-million-member federal workforce, for example, 6 out of 10 employees could retire over the next decade, prompting a recent congressional proposal to lure retirees back to work with new financial incentives.
Brett Steenbarger: "We've seen impressive momentum/strength from the recent market, but we're also quite overbought in my Demand/Supply index."
General Electric Co. has agreed to buy British maker of oilfield services equipment Sondex Plc for 288.7 million pounds ($583.1 million) in cash, the two companies said on Monday.
China's $1.3 trillion stockpile of foreign exchange reserves has no exposure to assets backed by U.S. subprime mortgages, a senior Chinese government official said Monday, according to reports. Wei Benhua, deputy director of the State Administration of Foreign Exchange, said China's foreign exchange holdings are unaffected by the turmoil in U.S. credit markets because it has zero exposure to the troubled sector, according to a report by Dow Jones Newswires.
The Seattle Times reported American workers stay longer in the office, at the factory or on the farm than their counterparts in Europe and most other rich nations, and they produce more per person over the year. They also get more done per hour than everyone but the Norwegians, according to a new U.N. report that says the United States "leads the world in labor productivity." The average U.S. worker produces $63,885 of wealth per year, more than their counterparts in all other countries, the International Labor Organization (ILO) said in its report.
According to Bloomberg, the market fallout from the subprime mortgage slump is less severe than in 1998 after Russia's default and the collapse of Long-Term Capital Management LP, the Bank for International Settlements said. The assessment from the BIS, which monitors financial markets for central banks and regulates lenders, contrasts with analysis from Standard & Poor's, which last week said the outlook for securities firms is worse than in 1998.
IKB Deutsche Industriebank AG, the German bank that's being bailed out after investing in U.S. subprime loans, will post a loss of as much as 700 million euros ($954 million).
"I came to Jackson Hole thinking there would be no recession, but I'm leaving thinking we could well have one,'' said Susan Wachter, a professor at the University of Pennsylvania's Wharton School."
Mike Shedlock: "Meanwhile back at the BLS, I see the stats show more jobs in financial services are assumed to be created by new businesses as opposed to being lost by firms going out of business for the months of....
* February - 11,000
* March - 8,000
* April - 26,000
* May - 7,000
* June - 6,000
* July - 6,000
Gosh. That's quite an achievement by the BLS Birth / Death Model is it not? Are bankruptcy counseling services growing faster than mortgage lenders and originators are going bust? I doubt it, especially if one adds in all the small 2-5 person mortgage origination businesses that are now out of business as well."
"We are happy to be rid of the British," Iraqi army officer Sadoun Hami said on Monday after Britain pulled out its troops from its last base in the southern Iraqi.
Alexander Hamilton: “It's not tyranny we desire; it's a just, limited, federal government.”
HSBC agreed to buy 51 percent of Korea Exchange Bank from private equity firm Lone Star for $6.3 billion, in a deal that could propel the UK-based bank into the top ranks of Asia's third-largest banking market.
According to the WSJ, Franco-Belgian utility Suez and French state-controlled gas company Gaz de France Monday announced their long-awaited merger, creating a major natural-gas and energy supplier called GDF Suez of which the French state will hold a 35% stake. The new entity will have a combined stock market capitalization of 90 billion euros ($122 billion) and revenues of €72 billion. Suez will be absorbed by Gaz de France via an exchange rate of 21 GdF shares for 22 Suez shares, the companies said. The deal involves the partial spin-off of Suez's environment activities.
The current turmoil in the financial markets has all the characteristics of a classic banking crisis, but one that is taking place outside the traditional banking sector, Axel Weber, president of the Bundesbank, said at the weekend.“What we are seeing is basically what we see underlying all banking crises,” said Mr Weber.
According to the FT, Russia is considering a ban on cereals exports in a move that exacerbates fears that wheat prices, already at an all-time high, could surge further on reduced supplies, European cereal traders said. Russia, the world’s fifth largest wheat exporter, is concerned about rising local bread prices and inflation ahead of legislative elections in December.
The LA Times: "I think we're beginning to see a much broader range of options and opportunities for mature workers," said Diane Piktialis, a specialist in older-worker issues with the Conference Board, a business research organization in New York. "This is an area where there's just enormous room for creativity in terms of how companies can adapt." Concerns are particularly acute in the areas of manufacturing, healthcare and government.
In the 3-million-member federal workforce, for example, 6 out of 10 employees could retire over the next decade, prompting a recent congressional proposal to lure retirees back to work with new financial incentives.
Brett Steenbarger: "We've seen impressive momentum/strength from the recent market, but we're also quite overbought in my Demand/Supply index."
General Electric Co. has agreed to buy British maker of oilfield services equipment Sondex Plc for 288.7 million pounds ($583.1 million) in cash, the two companies said on Monday.
China's $1.3 trillion stockpile of foreign exchange reserves has no exposure to assets backed by U.S. subprime mortgages, a senior Chinese government official said Monday, according to reports. Wei Benhua, deputy director of the State Administration of Foreign Exchange, said China's foreign exchange holdings are unaffected by the turmoil in U.S. credit markets because it has zero exposure to the troubled sector, according to a report by Dow Jones Newswires.
The Seattle Times reported American workers stay longer in the office, at the factory or on the farm than their counterparts in Europe and most other rich nations, and they produce more per person over the year. They also get more done per hour than everyone but the Norwegians, according to a new U.N. report that says the United States "leads the world in labor productivity." The average U.S. worker produces $63,885 of wealth per year, more than their counterparts in all other countries, the International Labor Organization (ILO) said in its report.
According to Bloomberg, the market fallout from the subprime mortgage slump is less severe than in 1998 after Russia's default and the collapse of Long-Term Capital Management LP, the Bank for International Settlements said. The assessment from the BIS, which monitors financial markets for central banks and regulates lenders, contrasts with analysis from Standard & Poor's, which last week said the outlook for securities firms is worse than in 1998.
IKB Deutsche Industriebank AG, the German bank that's being bailed out after investing in U.S. subprime loans, will post a loss of as much as 700 million euros ($954 million).
"I came to Jackson Hole thinking there would be no recession, but I'm leaving thinking we could well have one,'' said Susan Wachter, a professor at the University of Pennsylvania's Wharton School."
Mike Shedlock: "Meanwhile back at the BLS, I see the stats show more jobs in financial services are assumed to be created by new businesses as opposed to being lost by firms going out of business for the months of....
* February - 11,000
* March - 8,000
* April - 26,000
* May - 7,000
* June - 6,000
* July - 6,000
Gosh. That's quite an achievement by the BLS Birth / Death Model is it not? Are bankruptcy counseling services growing faster than mortgage lenders and originators are going bust? I doubt it, especially if one adds in all the small 2-5 person mortgage origination businesses that are now out of business as well."
"We are happy to be rid of the British," Iraqi army officer Sadoun Hami said on Monday after Britain pulled out its troops from its last base in the southern Iraqi.
Alexander Hamilton: “It's not tyranny we desire; it's a just, limited, federal government.”
Saturday, September 01, 2007
Welcome To September
9/2/07 Welcome To September
Ameriquest Mortgage Co, the largest U.S. subprime lender as recently as 2005, is closing, the latest home loan provider to shut down amid the nation's housing market slump. Citigroup Inc agreed to buy the wholesale mortgage lending and payment collection assets of Ameriquest's parent, ACC Capital Holdings, for an undisclosed price.
Toyota plans to sell 10.4 million vehicles globally in 2009, well above the auto industry's current 30-year-old record and another sign of the Japanese automaker's momentum toward displacing industry kingpin General Motors.
"There are hopeful, positive signals," IAEA chief Mohamed ElBaradei said in an interview with the weekly Der Spiegel, released ahead of its publication Sunday. "For the first time, we have agreed with the Iranians on a kind of road map, a timetable according to which the outstanding questions should be cleared up." "By November, at the latest December, we should be able to see whether the Iranians are keeping the promises they gave," he said. "If they did not do that, a great chance - perhaps the last one - would be lost for Tehran."
The Bush administration can go ahead with a pilot program to allow as many as 100 Mexican trucking companies to freely haul their cargo anywhere within the U.S. for the next year, a federal appeals court ruled Friday. The 9th U.S. Circuit Court of Appeals denied a request made by the Teamsters union, the Sierra Club and the nonprofit Public Citizen to halt the program.
Cosmos Bank, the Taiwanese lender, narrowly avoided a takeover by the government on Friday by agreeing to sell a controlling stake to SAC Capital, a US hedge fund group, and GE Money at a steep discount. Taiwan’s largest issuer of cash-advance cards signed a memorandum of understanding with SAC’s private equity arm and GE Money, a finance arm of General Electric, under which the two investors would pay $900m for a combined 80 per cent stake in Cosmos.
Zman: " Gas Inventories Are Now 12% Above The Five Year Average (down from 13% last week), and 2% Above Last Year's Record Levels."
Boeing is expected to announce Wednesday a further delay in the first flight of its 787 Dreamliner jet — one that could push that milestone into late October or beyond, according to a person close to the program...Replacing thousands of temporary fasteners with permanent ones has taken longer than anticipated, and the installation of wiring and other systems has hardly begun, according to the source.
According to rigzone, the government of Kazakhstan expects compensation for what it sees as "tens of billions of dollars" of economic harm due to massive cost overruns and delays at the Kashagan oil project, led by Italy's Eni, a government official said Friday.
Dr. Jeff Miller (courtesy of Seeking Alpha):
# Fed funds have averaged 5.25% over the past five days, and 5.00% over the past fifteen, since the crisis began.
# The Fed’s last permanent injection of liquidity was May 3rd. That’s a pretty long time for no injection, even in a tightening cycle.
# The monetary base is flat, growing little over the last year. If policy changed recently, I can’t see it.
# Policy change doesn’t show up in the monetary aggregates either, but lag effects dominate here.
# 3 month LIBOR is back around 5.60%, and the 3-month T-bill around 4% (rallying today). A TED spread at 1.6% indicates a lot of fear. Kinda surprised that swap spreads have not budged much.
According to the FT, investment banks are set to cut 10-15 per cent of their staff across the board as turmoil in the markets takes its toll on revenues. The bulk of cuts are expected in structured credit and leveraged finance, though recruitment experts said other investment banking areas could be affected.
The Times: "The banks that underwrote the $45 billion acquisition of TXU Corp, the world’s biggest buyout, have offered to pay the $1 billion (£495 million) break fee in a desperate attempt to convince the private equity backers to drop their bid. It is understood that the banks asked Kohlberg Kravis Roberts and TPG to consider withdrawing their offer after the turmoil in the credit markets meant that the banks would have little or no chance of syndicating the record-breaking $37 billion loan to investors. The banks include Goldman Sachs, Morgan Stanley, Citigroup, Lehman Brothers and JPMorgan.”
According to the WSJ, a survey by the Mortgage Bankers Association found that mortgages on properties that aren’t occupied by the owner -- mostly investment homes -- account for between 21% and 32% of the defaults on prime-quality home loans in Arizona, California, Florida and Nevada, states where overdue payments are mounting fast. Defaults were high on both prime and subprime loans.
George W. Bush: " You can fool some of the people all the time, and those are the ones you want to concentrate on."
Ameriquest Mortgage Co, the largest U.S. subprime lender as recently as 2005, is closing, the latest home loan provider to shut down amid the nation's housing market slump. Citigroup Inc agreed to buy the wholesale mortgage lending and payment collection assets of Ameriquest's parent, ACC Capital Holdings, for an undisclosed price.
Toyota plans to sell 10.4 million vehicles globally in 2009, well above the auto industry's current 30-year-old record and another sign of the Japanese automaker's momentum toward displacing industry kingpin General Motors.
"There are hopeful, positive signals," IAEA chief Mohamed ElBaradei said in an interview with the weekly Der Spiegel, released ahead of its publication Sunday. "For the first time, we have agreed with the Iranians on a kind of road map, a timetable according to which the outstanding questions should be cleared up." "By November, at the latest December, we should be able to see whether the Iranians are keeping the promises they gave," he said. "If they did not do that, a great chance - perhaps the last one - would be lost for Tehran."
The Bush administration can go ahead with a pilot program to allow as many as 100 Mexican trucking companies to freely haul their cargo anywhere within the U.S. for the next year, a federal appeals court ruled Friday. The 9th U.S. Circuit Court of Appeals denied a request made by the Teamsters union, the Sierra Club and the nonprofit Public Citizen to halt the program.
Cosmos Bank, the Taiwanese lender, narrowly avoided a takeover by the government on Friday by agreeing to sell a controlling stake to SAC Capital, a US hedge fund group, and GE Money at a steep discount. Taiwan’s largest issuer of cash-advance cards signed a memorandum of understanding with SAC’s private equity arm and GE Money, a finance arm of General Electric, under which the two investors would pay $900m for a combined 80 per cent stake in Cosmos.
Zman: " Gas Inventories Are Now 12% Above The Five Year Average (down from 13% last week), and 2% Above Last Year's Record Levels."
Boeing is expected to announce Wednesday a further delay in the first flight of its 787 Dreamliner jet — one that could push that milestone into late October or beyond, according to a person close to the program...Replacing thousands of temporary fasteners with permanent ones has taken longer than anticipated, and the installation of wiring and other systems has hardly begun, according to the source.
According to rigzone, the government of Kazakhstan expects compensation for what it sees as "tens of billions of dollars" of economic harm due to massive cost overruns and delays at the Kashagan oil project, led by Italy's Eni, a government official said Friday.
Dr. Jeff Miller (courtesy of Seeking Alpha):
# Fed funds have averaged 5.25% over the past five days, and 5.00% over the past fifteen, since the crisis began.
# The Fed’s last permanent injection of liquidity was May 3rd. That’s a pretty long time for no injection, even in a tightening cycle.
# The monetary base is flat, growing little over the last year. If policy changed recently, I can’t see it.
# Policy change doesn’t show up in the monetary aggregates either, but lag effects dominate here.
# 3 month LIBOR is back around 5.60%, and the 3-month T-bill around 4% (rallying today). A TED spread at 1.6% indicates a lot of fear. Kinda surprised that swap spreads have not budged much.
According to the FT, investment banks are set to cut 10-15 per cent of their staff across the board as turmoil in the markets takes its toll on revenues. The bulk of cuts are expected in structured credit and leveraged finance, though recruitment experts said other investment banking areas could be affected.
The Times: "The banks that underwrote the $45 billion acquisition of TXU Corp, the world’s biggest buyout, have offered to pay the $1 billion (£495 million) break fee in a desperate attempt to convince the private equity backers to drop their bid. It is understood that the banks asked Kohlberg Kravis Roberts and TPG to consider withdrawing their offer after the turmoil in the credit markets meant that the banks would have little or no chance of syndicating the record-breaking $37 billion loan to investors. The banks include Goldman Sachs, Morgan Stanley, Citigroup, Lehman Brothers and JPMorgan.”
According to the WSJ, a survey by the Mortgage Bankers Association found that mortgages on properties that aren’t occupied by the owner -- mostly investment homes -- account for between 21% and 32% of the defaults on prime-quality home loans in Arizona, California, Florida and Nevada, states where overdue payments are mounting fast. Defaults were high on both prime and subprime loans.
George W. Bush: " You can fool some of the people all the time, and those are the ones you want to concentrate on."
Friday, August 31, 2007
The Speech And Government Numbers
9/1/07 The Speech And Gov't Numbers
Orders for U.S.-made factory goods rose by 3.7% in July, the Commerce Department reported Friday. Excluding transportation, however, orders rose by 2.4%. Shipments rose by 2.6%. Orders for durable goods rose 6.0% in July. In a preliminary report last week, they were reported to rise by 5.9%. Shipments of durable goods rose by 3.9% in July, revised up slightly from the 3.8% reported last week. Orders for core capital goods rose by 1.7% in July. In June, those orders fell by 0.2%.
Bernanke said the central bank will be paying "particularly close attention to the timeliest indicators" to assess how the recent credit crisis and financial market turmoil is impacting the real economy. Bernanke said the economy continued to expand into the summer despite the weakness in housing but "in light of recent financial developments, economic data bearing on past months or quarters may be less useful than usual for our forecasts of economic activity and inflation." Bernanke repeated the Federal Open Market Committee pledge to act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets. He said it is not the responsibility of the Fed to protect lenders and investors from the consequences of their financial decisions, but quickly added that "developments in financial markets can have broad economic effects felt by many outside the markets and the Fed must take those effects into account when determining policy. Bernanke said the central bank stands ready to take additional steps to provide liquidity and promote the orderly functioning or markets. Bernanke offered no clear signal that the Fed is poised to cut interest rates in a speech to central bankers. In other words, pretty vanilla remarks in my view.
The Chicago purchasing managers index was relatively unchanged at 53.8% in August vs. 53.4% in July. The new orders index rose to 58.4% vs. 53.4% in July.
Inflation was milder than expected in July, with total inflation rising 0.1%, matching the 0.1% gain for core inflation excluding food and energy costs. In the past year, the Federal Reserve's preferred measure of core inflation has risen 1.9%, just within the Fed's unofficial target zone. Nominal incomes increased 0.5%, the best since March after rising 0.4% in June. After adjusting for inflation and taking out taxes, real disposable incomes grew 0.5%, the best since February. Inflation-adjusted spending rose 0.3% in July after two tepid months of spending. Savings was up 0.7%.
Accredited Home Lenders surged 32% to $8.35 in pre-open trade as Lone Star Funds said in a letter late Thursday it is willing to offer $214 million, or $8.50 a share for the firm. Lone Star is tabling 44% less than it first offered for the troubled subprime lender.
India's economy expanded at a higher-than-expected 9.3% during fiscal first quarter ended June from a year ago on robust growth in the manufacturing and services sectors, according to official data released Friday. Economists polled by both Dow Jones Newswires and Reuters estimated growth of 8.9%. India's gross domestic product rose 9.1% during the January-March period.
Barclays on Friday threw a $1.4bn lifeline to a structured debt vehicle the bank helped set up with Cairn Capital, the London-based hedge fund, and is considering similar moves for other vehicles.
Borrowing from the Fed's discount window dropped to $1.101 billion as of Wednesday, about half the $2.001 billion level reported a week earlier, the central bank disclosed yesterday.
Oct. crude climbed 68 cents to close at $74.04 a barrel. October natural gas fell 3% Friday to close at $5.468 per million British thermal units, down 4.7% from a week ago and down 14.8% from a month ago. Gold closed up $8 for the session.
In the short trading session on Friday the month ended on a strong note with the Dow up 157, the Nasdaq up 32 and the S&P 500 up almost 20 points. We now enter September, which is historically the worst month of the year.
Orders for U.S.-made factory goods rose by 3.7% in July, the Commerce Department reported Friday. Excluding transportation, however, orders rose by 2.4%. Shipments rose by 2.6%. Orders for durable goods rose 6.0% in July. In a preliminary report last week, they were reported to rise by 5.9%. Shipments of durable goods rose by 3.9% in July, revised up slightly from the 3.8% reported last week. Orders for core capital goods rose by 1.7% in July. In June, those orders fell by 0.2%.
Bernanke said the central bank will be paying "particularly close attention to the timeliest indicators" to assess how the recent credit crisis and financial market turmoil is impacting the real economy. Bernanke said the economy continued to expand into the summer despite the weakness in housing but "in light of recent financial developments, economic data bearing on past months or quarters may be less useful than usual for our forecasts of economic activity and inflation." Bernanke repeated the Federal Open Market Committee pledge to act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets. He said it is not the responsibility of the Fed to protect lenders and investors from the consequences of their financial decisions, but quickly added that "developments in financial markets can have broad economic effects felt by many outside the markets and the Fed must take those effects into account when determining policy. Bernanke said the central bank stands ready to take additional steps to provide liquidity and promote the orderly functioning or markets. Bernanke offered no clear signal that the Fed is poised to cut interest rates in a speech to central bankers. In other words, pretty vanilla remarks in my view.
The Chicago purchasing managers index was relatively unchanged at 53.8% in August vs. 53.4% in July. The new orders index rose to 58.4% vs. 53.4% in July.
Inflation was milder than expected in July, with total inflation rising 0.1%, matching the 0.1% gain for core inflation excluding food and energy costs. In the past year, the Federal Reserve's preferred measure of core inflation has risen 1.9%, just within the Fed's unofficial target zone. Nominal incomes increased 0.5%, the best since March after rising 0.4% in June. After adjusting for inflation and taking out taxes, real disposable incomes grew 0.5%, the best since February. Inflation-adjusted spending rose 0.3% in July after two tepid months of spending. Savings was up 0.7%.
Accredited Home Lenders surged 32% to $8.35 in pre-open trade as Lone Star Funds said in a letter late Thursday it is willing to offer $214 million, or $8.50 a share for the firm. Lone Star is tabling 44% less than it first offered for the troubled subprime lender.
India's economy expanded at a higher-than-expected 9.3% during fiscal first quarter ended June from a year ago on robust growth in the manufacturing and services sectors, according to official data released Friday. Economists polled by both Dow Jones Newswires and Reuters estimated growth of 8.9%. India's gross domestic product rose 9.1% during the January-March period.
Barclays on Friday threw a $1.4bn lifeline to a structured debt vehicle the bank helped set up with Cairn Capital, the London-based hedge fund, and is considering similar moves for other vehicles.
Borrowing from the Fed's discount window dropped to $1.101 billion as of Wednesday, about half the $2.001 billion level reported a week earlier, the central bank disclosed yesterday.
Oct. crude climbed 68 cents to close at $74.04 a barrel. October natural gas fell 3% Friday to close at $5.468 per million British thermal units, down 4.7% from a week ago and down 14.8% from a month ago. Gold closed up $8 for the session.
In the short trading session on Friday the month ended on a strong note with the Dow up 157, the Nasdaq up 32 and the S&P 500 up almost 20 points. We now enter September, which is historically the worst month of the year.
Thursday, August 30, 2007
Where Do I Begin?
8/31/07 Where Do I Begin?
Outstanding volumes of commercial paper fell $62.8 billion last week, or 3.1%, to $1.98 trillion, the Federal Reserve reported Thursday. Asset-backed paper fell by $59.4 billion, or 5.6%, to $998 billion. The total decline in short-term securities over the past three weeks has totaled $244 billion, or 11%.
Thornburg Mortgage Inc. priced a public offering of 20 million shares of its 10% Series F cumulative convertible redeemable preferred stock at $25 each, generating net proceeds of $473 million. The shares are convertible into common stock at the option of the holder at any time at a conversion price of $11.50 each. Thornburg said the proceeds will be primarily used to improve its liquidity position and to resume its origination of mortgage loans and acquisition of mortgage-backed securities.
Freddie Mac reported its second quarter net income declined 45% primarily due to a higher provision for credit losses and mark-to-market losses on credit-related items.
As of Aug. 24, the Bank of Montreal had bought $1 billion of paper from eight of its mutual funds, $90 million from six funds operated by Altamira Investment Services Inc. and $560 million from pooled funds. It said it expect to buy the rest of the $2 billion of paper shortly. National Bank said it "is in contact with other customers who hold [asset-backed commercial paper] acquired through the bank or its subsidiaries and is working with them to attempt to resolve their liquidity and other issues in the context of their overall banking relationship."
Initial jobless claims for the week ended Aug. 25 rose by 9,000 to 334,000, the highest since April 14, the Labor Department reported Thursday. The four-week average of those claims climbed by 6,250 to 324,500. It was the highest since April 28. The number of people continuing to collect unemployment benefits climbed by 13,000, reaching 2.60 million in the week ended Aug. 18. It marked the highest level since April 14. The four-week average of continuing claims rose by 11,250 to 2.56 million, the highest level since mid-January 2006.
Analysts at Lehman Brothers on Thursday lowered their profit estimates for the largest U.S. brokerage firms, citing the uncertainty in the credit markets. "We believe that third-quarter earnings will be significantly impacted by the dislocation in the credit and asset-backed/mortgage markets, only partially offset by strength in currencies, rates and commodities as well as decent equities comparisons and favorable investment banking conditions at least through July," the analysts wrote in a research note.
H&R Block Inc said it was trying to renegotiate the sale of its Option One Mortgage Corp unit and would get out subprime lending after its quarterly loss more than doubled.
The municipal government of Beijing plans to build underground natural gas reserves by 2010 to ensure supplies will meet soaring demand, the city's economic planner said in a 2006-2010 plan for urban gas development. The city's natural gas demand is expected to reach 7 billion-8 billion cubic meters a year by 2010, compared with 2.6 billion cubic meters in 2004, according to the plan posted Wednesday by the Beijing Development and Reform Commission on its Web site. A comparable figure for last year wasn't provided.
The U.N. nuclear agency said Thursday that Iran was producing less nuclear fuel than expected and praised Tehran for ''a significant step forward'' in explaining past atomic actions that have raised suspicions. The assessment is expected to make it more difficult for the United States to rally support for a new round of sanctions against Tehran.
Sears Holdings Corp. reported fiscal second-quarter earnings that were down 40 percent, reflecting softer results from the Chicago retail company's Kmart and domestic Sears operations. Profit margins came under pressure because sales declined 4 percent to $12.24 billion from $12.79 billion.
Turkmen President Gurbanguly Berdymukhamedov has inaugurated construction of a 7,000-kilometer gas pipeline to China to be completed by 2009, the official Turkmen newspaper said.
Iraq has failed to meet all but three of 18 congressionally mandated benchmarks for political and military progress, according to a draft of a Government Accountability Office report. The document questions whether some aspects of a more positive assessment by the White House last month adequately reflected the range of views the GAO found within the administration.
Gasoline prices rose to a near six- week high in Europe on speculation falling stockpiles will increase demand for exports.
A company does not make an application with the FDA to proceed to phase III
trials unless they are confident that they will in fact be able to proceed.( This is a May 2007 release: "We are extremely pleased with the positive reception that our Phase 2B studies received at the AUA meeting," stated Dr. Trevor Hallam, Palatin's Executive Vice President of R&D. Dr. Hallam further commented, "We are looking forward to discussing these results with the FDA at an end of Phase
2 meeting later this year and moving to Phase 3 trials as soon as
possible." What took place? Do I feel stupid? No need to ask. It will not be the last time I look stupid! "Palatin Technologies, Inc. and King Pharmaceuticals, Inc. announced today that they have delayed plans for the initiation of Phase 3 clinical trials with bremelanotide, a first in class melanocortin agonist drug candidate, for the treatment of male erectile dysfunction (ED). The decision follows responses from representatives of the U.S. Food and Drug Administration (FDA), which raised serious concerns about the acceptable benefit/risk ratio to support the progression of the proposed program into Phase 3 studies for ED. After reviewing the data generated in the Phase 1 and 2 studies, the FDA questioned the overall efficacy results and the clinical benefit of this product in both the general and diabetic ED populations, and cited blood pressure increases as its greatest safety concern. Though not supportive of the proposed Phase 3 studies for ED with bremelanotide, the FDA stated that it was amenable to proposals for a different drug development pathway, such as for a second-line therapy in non-responders to currently approved PDE-5 inhibitors."The safety of patients in our clinical program has always been our number one priority and we will work closely with the FDA, King, and our advisors to determine the next steps for the program," stated Carl Spana, Ph.D., President and Chief Executive Officer of Palatin. Palatin and King plan to review the FDA comments in the overall context of the program in order to determine next steps related to the further development of bremelanotide for the treatment of ED." Just an aside. In all the research documentation, I have not seen a mention of high blood pressure as a side effect.
According to Bloomberg, "Standard & Poor's said business conditions for securities firms are worse than in the second half of 1998 and revenue from investment banking and trading could fall 47 percent in the final six months of this year."
Henry To: "Approximately 90% of all subprime mortgages that were originated from 2004 to 2006 will be eventually subjected to resets - with a peak of sometime in the spring of next year. Given that 1) less than 50% are "full doc" loans, 2) About 25% to 30% are interest-only ARM loans, and that 3) the average combined loan-to-value ratio is about 92% to 95% - when the 2004 to 2006 vintages reset over the next 18 months, it is going to be vicious. Of course, all the above won't matter too much if we are still in an era of rising house prices and easy financing - but as everyone and his neighbor should now know, that era is now over."
Gold for December delivery fell $1.50, or 0.2%, to $673.90 an ounce on the New York Mercantile Exchange. Copper futures closed nearly unchanged at $3.35 a pound. Among precious metals, silver for September delivery slipped 5 cents to $11.791 an ounce. October platinum lost $6.70 a pound to close at $1,260.10 an ounce, while palladium slipped 20 cents to close at $335.60 an ounce.
``There's that fear of commercial paper that's driving people into the bills market,'' said Nasri Toutoungi, who oversees $23 billion of bonds in Hartford, Connecticut, at Hartford Investment Management Co. ``It's becoming irrational.'' The yield on the three-month Treasury bill fell 21 basis points, or 0.21 percentage point, to 3.80 percent at 3:45 p.m. in New York, according to Bloomberg data. The yield has dropped 114 basis points since Aug. 8.
According to FT, Barclays rushed to reassure investors and depositors on Thursday night after it was forced by what it said was a technical glitch to borrow from the Bank of England’s emergency reserves for the second time in just over a week.The UK bank issued a statement after it emerged it had borrowed £1.6bn (€2.4bn) from the central bank’s emergency facility on Wednesday evening. The facility, which carries a penalty rate of interest, has become the subject of intense scrutiny by investors as they search for signs of distress as a result of the recent turmoil in the capital markets.
In the week ending Aug. 29, primary credit borrowing at the discount window averaged $1.3 billion, up from an average of $1.2 billion a week ago. On Wednesday alone, primary credits totaled $1.1 billion, down from $2 billion a week earlier. The data show that, aside from the previously announced loans by five major money center banks, little or no new borrowing from the discount window has taken place.
Outstanding volumes of commercial paper fell $62.8 billion last week, or 3.1%, to $1.98 trillion, the Federal Reserve reported Thursday. Asset-backed paper fell by $59.4 billion, or 5.6%, to $998 billion. The total decline in short-term securities over the past three weeks has totaled $244 billion, or 11%.
Thornburg Mortgage Inc. priced a public offering of 20 million shares of its 10% Series F cumulative convertible redeemable preferred stock at $25 each, generating net proceeds of $473 million. The shares are convertible into common stock at the option of the holder at any time at a conversion price of $11.50 each. Thornburg said the proceeds will be primarily used to improve its liquidity position and to resume its origination of mortgage loans and acquisition of mortgage-backed securities.
Freddie Mac reported its second quarter net income declined 45% primarily due to a higher provision for credit losses and mark-to-market losses on credit-related items.
As of Aug. 24, the Bank of Montreal had bought $1 billion of paper from eight of its mutual funds, $90 million from six funds operated by Altamira Investment Services Inc. and $560 million from pooled funds. It said it expect to buy the rest of the $2 billion of paper shortly. National Bank said it "is in contact with other customers who hold [asset-backed commercial paper] acquired through the bank or its subsidiaries and is working with them to attempt to resolve their liquidity and other issues in the context of their overall banking relationship."
Initial jobless claims for the week ended Aug. 25 rose by 9,000 to 334,000, the highest since April 14, the Labor Department reported Thursday. The four-week average of those claims climbed by 6,250 to 324,500. It was the highest since April 28. The number of people continuing to collect unemployment benefits climbed by 13,000, reaching 2.60 million in the week ended Aug. 18. It marked the highest level since April 14. The four-week average of continuing claims rose by 11,250 to 2.56 million, the highest level since mid-January 2006.
Analysts at Lehman Brothers on Thursday lowered their profit estimates for the largest U.S. brokerage firms, citing the uncertainty in the credit markets. "We believe that third-quarter earnings will be significantly impacted by the dislocation in the credit and asset-backed/mortgage markets, only partially offset by strength in currencies, rates and commodities as well as decent equities comparisons and favorable investment banking conditions at least through July," the analysts wrote in a research note.
H&R Block Inc said it was trying to renegotiate the sale of its Option One Mortgage Corp unit and would get out subprime lending after its quarterly loss more than doubled.
The municipal government of Beijing plans to build underground natural gas reserves by 2010 to ensure supplies will meet soaring demand, the city's economic planner said in a 2006-2010 plan for urban gas development. The city's natural gas demand is expected to reach 7 billion-8 billion cubic meters a year by 2010, compared with 2.6 billion cubic meters in 2004, according to the plan posted Wednesday by the Beijing Development and Reform Commission on its Web site. A comparable figure for last year wasn't provided.
The U.N. nuclear agency said Thursday that Iran was producing less nuclear fuel than expected and praised Tehran for ''a significant step forward'' in explaining past atomic actions that have raised suspicions. The assessment is expected to make it more difficult for the United States to rally support for a new round of sanctions against Tehran.
Sears Holdings Corp. reported fiscal second-quarter earnings that were down 40 percent, reflecting softer results from the Chicago retail company's Kmart and domestic Sears operations. Profit margins came under pressure because sales declined 4 percent to $12.24 billion from $12.79 billion.
Turkmen President Gurbanguly Berdymukhamedov has inaugurated construction of a 7,000-kilometer gas pipeline to China to be completed by 2009, the official Turkmen newspaper said.
Iraq has failed to meet all but three of 18 congressionally mandated benchmarks for political and military progress, according to a draft of a Government Accountability Office report. The document questions whether some aspects of a more positive assessment by the White House last month adequately reflected the range of views the GAO found within the administration.
Gasoline prices rose to a near six- week high in Europe on speculation falling stockpiles will increase demand for exports.
A company does not make an application with the FDA to proceed to phase III
trials unless they are confident that they will in fact be able to proceed.( This is a May 2007 release: "We are extremely pleased with the positive reception that our Phase 2B studies received at the AUA meeting," stated Dr. Trevor Hallam, Palatin's Executive Vice President of R&D. Dr. Hallam further commented, "We are looking forward to discussing these results with the FDA at an end of Phase
2 meeting later this year and moving to Phase 3 trials as soon as
possible." What took place? Do I feel stupid? No need to ask. It will not be the last time I look stupid! "Palatin Technologies, Inc. and King Pharmaceuticals, Inc. announced today that they have delayed plans for the initiation of Phase 3 clinical trials with bremelanotide, a first in class melanocortin agonist drug candidate, for the treatment of male erectile dysfunction (ED). The decision follows responses from representatives of the U.S. Food and Drug Administration (FDA), which raised serious concerns about the acceptable benefit/risk ratio to support the progression of the proposed program into Phase 3 studies for ED. After reviewing the data generated in the Phase 1 and 2 studies, the FDA questioned the overall efficacy results and the clinical benefit of this product in both the general and diabetic ED populations, and cited blood pressure increases as its greatest safety concern. Though not supportive of the proposed Phase 3 studies for ED with bremelanotide, the FDA stated that it was amenable to proposals for a different drug development pathway, such as for a second-line therapy in non-responders to currently approved PDE-5 inhibitors."The safety of patients in our clinical program has always been our number one priority and we will work closely with the FDA, King, and our advisors to determine the next steps for the program," stated Carl Spana, Ph.D., President and Chief Executive Officer of Palatin. Palatin and King plan to review the FDA comments in the overall context of the program in order to determine next steps related to the further development of bremelanotide for the treatment of ED." Just an aside. In all the research documentation, I have not seen a mention of high blood pressure as a side effect.
According to Bloomberg, "Standard & Poor's said business conditions for securities firms are worse than in the second half of 1998 and revenue from investment banking and trading could fall 47 percent in the final six months of this year."
Henry To: "Approximately 90% of all subprime mortgages that were originated from 2004 to 2006 will be eventually subjected to resets - with a peak of sometime in the spring of next year. Given that 1) less than 50% are "full doc" loans, 2) About 25% to 30% are interest-only ARM loans, and that 3) the average combined loan-to-value ratio is about 92% to 95% - when the 2004 to 2006 vintages reset over the next 18 months, it is going to be vicious. Of course, all the above won't matter too much if we are still in an era of rising house prices and easy financing - but as everyone and his neighbor should now know, that era is now over."
Gold for December delivery fell $1.50, or 0.2%, to $673.90 an ounce on the New York Mercantile Exchange. Copper futures closed nearly unchanged at $3.35 a pound. Among precious metals, silver for September delivery slipped 5 cents to $11.791 an ounce. October platinum lost $6.70 a pound to close at $1,260.10 an ounce, while palladium slipped 20 cents to close at $335.60 an ounce.
``There's that fear of commercial paper that's driving people into the bills market,'' said Nasri Toutoungi, who oversees $23 billion of bonds in Hartford, Connecticut, at Hartford Investment Management Co. ``It's becoming irrational.'' The yield on the three-month Treasury bill fell 21 basis points, or 0.21 percentage point, to 3.80 percent at 3:45 p.m. in New York, according to Bloomberg data. The yield has dropped 114 basis points since Aug. 8.
According to FT, Barclays rushed to reassure investors and depositors on Thursday night after it was forced by what it said was a technical glitch to borrow from the Bank of England’s emergency reserves for the second time in just over a week.The UK bank issued a statement after it emerged it had borrowed £1.6bn (€2.4bn) from the central bank’s emergency facility on Wednesday evening. The facility, which carries a penalty rate of interest, has become the subject of intense scrutiny by investors as they search for signs of distress as a result of the recent turmoil in the capital markets.
In the week ending Aug. 29, primary credit borrowing at the discount window averaged $1.3 billion, up from an average of $1.2 billion a week ago. On Wednesday alone, primary credits totaled $1.1 billion, down from $2 billion a week earlier. The data show that, aside from the previously announced loans by five major money center banks, little or no new borrowing from the discount window has taken place.
Wednesday, August 29, 2007
Not Quiet On The Western Front
8/30/07 Not Quiet On The Western Front
In a bid to expand its presence in Europe, Kazakhstan's state-controlled oil and gas company KazMunayGas has agreed to buy a 75% equity stake in oil firm Rompetrol Group N.V. in an acquisition estimated to be worth $2.7 billion.
The key asset of Netherlands-based Rompetrol Group N.V. is refiner Rompetrol Rafinare SA in Romania, whose shares surged 14% on the Bucharest Stock Exchange Tuesday. In a bid to expand its presence in Europe, Kazakhstan's state-controlled oil and gas company KazMunayGas has agreed to buy a 75% equity stake in oil firm Rompetrol Group N.V. in an acquisition estimated to be worth $2.7 billion.
The key asset of Netherlands-based Rompetrol Group N.V. is refiner Rompetrol Rafinare SA in Romania, whose shares surged 14% on the Bucharest Stock Exchange Tuesday.
The Daily Reckoning: “The Bush regime says it is going to designate part of Iran’s military – the Revolutionary Guards – a terrorist organization, whose bases and facilities Bush intends to bomb along with Iran’s nuclear energy sites. Three U.S. aircraft carrier strike forces are deployed off Iran. B-2 Stealth bombers are being fitted to carry 30,000 pound ‘bunker-buster’ bombs to use against hardened sites. Politicized U.S. generals assert that Iran is providing arms and aid to the Iraqi resistance to the U.S. occupation. The media are feeding the U.S. population the same propaganda about nonexistent Iranian weapons of mass destruction that they fed us about nonexistent Iraqi weapons of mass destruction. A former CIA Middle East field officer, Robert Baer, has written in Time magazine that the Bush regime has decided to attack the Revolutionary Guards within the next six months. Remember the ‘cakewalk war’? Well, this time the neocons think that an attack on the Revolutionary Guards will free Iran from Islamic influence and cause Iranians to back the U.S. against their own government.
“Lies, unprovoked aggression, and delusional expectations – the same ingredients that produced the Iraq catastrophe – all over again. The entire Bush regime and both political parties are complicit, along with the media and U.S. allies.”
"According to our analysis, although more measures have been taken to control the inflation, the (increase in the consumer price index) this year will likely be above 3 percent," Su Ning, a vice governor of the People's Bank of China, said at a news conference in Beijing.
Kate Incontrera: "Auto sales have been weak this year - and if the data from August, which is reported on September 4, is negative, it will be the sixth month this year and the third month in a row that sales have been down."
Washington Post:" President Bush plans to ask Congress next month for up to $50 billion in additional funding for the war in Iraq, a White House official said yesterday, a move that appears to reflect increasing administration confidence that it can fend off congressional calls for a rapid drawdown of U.S. forces.The request -- which would come on top of about $460 billion in the fiscal 2008 defense budget and $147 billion in a pending supplemental bill to fund the wars in Afghanistan and Iraq -- is expected to be announced after congressional hearings scheduled for mid-September featuring the two top U.S. officials in Iraq. Army Gen. David H. Petraeus and Ambassador Ryan C. Crocker will assess the state of the war and the effect of the new strategy the U.S. military has pursued this year."
In California, where the median home price is well above $500,000, jumbo mortgages are as much as 44 percent of all mortgages issued in certain metro areas, according to data from First American LoanPerformance. In and around San Francisco, where the median home price is about $1.1 million, the tougher financing environment has created a "hesitancy" and has led to some canceled escrows for buyers around the $1 million range, said Rick Turley, president of the San Francisco and Peninsula Region for Coldwell Banker Residential Brokerage.
According to Bloomberg, Cheyne Capital Management Ltd., whose Queen's Walk mortgage bond fund reported losses in June, may be forced to sell assets backing a $6 billion commercial paper program after a global credit market rout. The Cheyne Finance LLC fund has been selling investments and has enough cash to repay commercial paper due through November, London-based hedge fund company Cheyne Capital Management said in a statement. Standard & Poor's cut Cheyne Finance's ratings yesterday, citing the deteriorating market value of its assets.
Investor confidence in high-risk, high-yield loans worsened today, according to traders of credit- default swaps. The iTraxx LevX Index of contracts on loans to 35 European companies fell 0.125 to 95.75, according to Deutsche Bank AG. The index dropped to 92.5 on July 30, the lowest since it started trading in October.
When Interstate Bakeries Corp. announced Tuesday that it was withdrawing from the Southland bread market, it meant that after Oct. 20, local shoppers no longer will be able to buy Wonder Bread. Interstate is closing four bakeries - in Pomona, Glendale, Los Angeles and San Diego - as well as eliminating 325 distribution routes and closing 17 distribution centers and 19 outlet stores.
The hardest-hit area will be Pomona, home of the largest of the four bakeries. Company spokeswoman Maya Pogoda said 768 of the 1,300 jobs are either directly or indirectly related to the Pomona plant.
"Interstate Bakeries has been in Chapter 11 bankruptcy since September 2004 and the company made the decision they can't afford to have losing markets if they hope to get back to profitability," Pogoda said. "We will stop baking and selling bread after Oct. 20 and the plant will close Oct. 29."
T. Rowe Price New Era"s Manager Charles Ober: ExxonMobil and Schlumberger are blue chips that Ober still likes. Among the major oil companies, he also likes France's Total and England's BP. He also recommends energy service firms Baker Hughes and BJ Services.
On Thursday morning, equities shot up strongly right at the opening but not the financials, such as, Countrywide and Goldman Sachs.
The American Petroleum Institute reported a fall of 4.9 million barrels in crude supplies for the week ended August 24. The Energy Department had reported a decline of 3.5 million barrels for the latest week. Motor gasoline supplies were down 2.4 million barrels, the API said. The government reported that supplies were down 3.6 million barrels. Distillate supplies climbed 1.7 million barrels, the API said. They were up 900,000 barrels, according to the Energy Department. Refinery utilization, meanwhile, slipped 1.3 percentage points to 90.3 percent of capacity.
Altria Group Inc. said Wednesday that it will pursue a spinoff of Philip Morris International unit to its shareholders and the precise timing will be announced in January.
Enzio von Pfiel: "The yen is going to strengthen massively, we reckon from 116 now to about 100 within three months. Reason: the US market is headed for an October crash,and that implies that there is going to be plenty of blood on the streets as regards yen carry trades. They will get unwound, so people who previously sold yen and bought higher-yielding assets on margin will find their bankers calling them to cover yen positions. In our piece of 7th July we suggested continuing with the yen carry trade; now we suggest that you get out of the yen carry trade.
The yield on the three-month Treasury bill was yield was down 34 basis points at 3.987%, while the yield on the six-month bill was down 44 basis points at 4.244%.
Moody's believes that the firms, Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Bros and Bear Stearns, have sufficient earnings strength and diversification to be able to absorb the necessary mark-downs on the loan pipeline while still generating positive, albeit depressed, earnings and a respectable level of profitability.
Samsung has edged Motorola aside to become the world's second-largest maker of cell phones.
The average rate on a one-year adjustable mortgage surged to 6.51 percent, the highest since January 2001, from 5.84 percent the prior week. The rate also surpassed the cost of a 30-year fixed loan for the first time.
The Federal Reserve will probably cut its benchmark interest rate to 4 percent as slowing U.S. economic growth restrains inflation, said Edward Hyman, chairman of International Strategy and Investment Group.
According to Bloomberg, wheat rose to a record, extending a rally that began in March, on signs dry weather in Ukraine and Australia may hurt production, reducing world supplies already expected to be the lowest in 26 years. Ukraine, the world's seventh-largest wheat exporter, will ship 58 percent less grain this year after a three-month drought, the country's agriculture minister said. Hotter- than-normal weather may reduce production in Australia, a country that was expected to be the second-largest exporter in the marketing year that started June 1, analysts said.
Gold has gained 5.9 percent this year as the dollar has fallen 3.4 percent against the euro. Silver has dropped 7.2 percent this year. One might consider accumulating a position in silver at these levels.
December gold climbed $1.90 to close at $675.40 an ounce Wednesday. September silver gained 8 cents to end at $11.845 an ounce and September copper finished at $3.35 a pound, up 1.2%.
Oct. crude up 2.5%, or $1.78, to close at $73.51 a barrel. Natural gas dipped 12 cents to $5.47.
The Teamsters Union said it will ask a federal appeals court to block the Bush administration's plan to begin allowing Mexican trucks to carry cargo anywhere in the United States. The union said it has been told by officials in the Transportation Department's Federal Motor Carrier Safety Administration that the first Mexican trucks will be coming across the border on Saturday. Teamsters leaders said they planned to seek an emergency injunction today from the Ninth Circuit U.S. Court of Appeals in San Francisco.
Kevin Duffy: "The current credit meltdown is a solvency crisis. Cheap and plentiful credit is what caused the current mess. More of the same can only make it worse. It is only a matter of time before this shot of credit heroine wears off. As with all drugs, at some point simply increasing the dosage has little or no stimulative effect. Sometimes the best medicine is withdrawal."
The VIX took it on the chin on Wednesday and dropped back to the 23.50 level as the Dow jumped 247 points, the Nasdaq 62, and the S&P about 32. The financial sector did a bit better but nothing better than mediocre.
Dry bulk vessel costs, measured by the London-based Baltic Dry Index, on Wednesday reached an all-time high of 7,474 points, up almost 100 per cent over the past 12 months, pushing the cost of a Panamax to almost $60,000 a day.
These burgeoning costs are significantly higher than what was anticipated just 6 months ago. According to the FT, the International Grain Council, the industry body, last week said several important grain routes, notably from the US to Asia, had double the transit volume in the past year, contributing to rising dry bulk carrier freight costs.
In a bid to expand its presence in Europe, Kazakhstan's state-controlled oil and gas company KazMunayGas has agreed to buy a 75% equity stake in oil firm Rompetrol Group N.V. in an acquisition estimated to be worth $2.7 billion.
The key asset of Netherlands-based Rompetrol Group N.V. is refiner Rompetrol Rafinare SA in Romania, whose shares surged 14% on the Bucharest Stock Exchange Tuesday. In a bid to expand its presence in Europe, Kazakhstan's state-controlled oil and gas company KazMunayGas has agreed to buy a 75% equity stake in oil firm Rompetrol Group N.V. in an acquisition estimated to be worth $2.7 billion.
The key asset of Netherlands-based Rompetrol Group N.V. is refiner Rompetrol Rafinare SA in Romania, whose shares surged 14% on the Bucharest Stock Exchange Tuesday.
The Daily Reckoning: “The Bush regime says it is going to designate part of Iran’s military – the Revolutionary Guards – a terrorist organization, whose bases and facilities Bush intends to bomb along with Iran’s nuclear energy sites. Three U.S. aircraft carrier strike forces are deployed off Iran. B-2 Stealth bombers are being fitted to carry 30,000 pound ‘bunker-buster’ bombs to use against hardened sites. Politicized U.S. generals assert that Iran is providing arms and aid to the Iraqi resistance to the U.S. occupation. The media are feeding the U.S. population the same propaganda about nonexistent Iranian weapons of mass destruction that they fed us about nonexistent Iraqi weapons of mass destruction. A former CIA Middle East field officer, Robert Baer, has written in Time magazine that the Bush regime has decided to attack the Revolutionary Guards within the next six months. Remember the ‘cakewalk war’? Well, this time the neocons think that an attack on the Revolutionary Guards will free Iran from Islamic influence and cause Iranians to back the U.S. against their own government.
“Lies, unprovoked aggression, and delusional expectations – the same ingredients that produced the Iraq catastrophe – all over again. The entire Bush regime and both political parties are complicit, along with the media and U.S. allies.”
"According to our analysis, although more measures have been taken to control the inflation, the (increase in the consumer price index) this year will likely be above 3 percent," Su Ning, a vice governor of the People's Bank of China, said at a news conference in Beijing.
Kate Incontrera: "Auto sales have been weak this year - and if the data from August, which is reported on September 4, is negative, it will be the sixth month this year and the third month in a row that sales have been down."
Washington Post:" President Bush plans to ask Congress next month for up to $50 billion in additional funding for the war in Iraq, a White House official said yesterday, a move that appears to reflect increasing administration confidence that it can fend off congressional calls for a rapid drawdown of U.S. forces.The request -- which would come on top of about $460 billion in the fiscal 2008 defense budget and $147 billion in a pending supplemental bill to fund the wars in Afghanistan and Iraq -- is expected to be announced after congressional hearings scheduled for mid-September featuring the two top U.S. officials in Iraq. Army Gen. David H. Petraeus and Ambassador Ryan C. Crocker will assess the state of the war and the effect of the new strategy the U.S. military has pursued this year."
In California, where the median home price is well above $500,000, jumbo mortgages are as much as 44 percent of all mortgages issued in certain metro areas, according to data from First American LoanPerformance. In and around San Francisco, where the median home price is about $1.1 million, the tougher financing environment has created a "hesitancy" and has led to some canceled escrows for buyers around the $1 million range, said Rick Turley, president of the San Francisco and Peninsula Region for Coldwell Banker Residential Brokerage.
According to Bloomberg, Cheyne Capital Management Ltd., whose Queen's Walk mortgage bond fund reported losses in June, may be forced to sell assets backing a $6 billion commercial paper program after a global credit market rout. The Cheyne Finance LLC fund has been selling investments and has enough cash to repay commercial paper due through November, London-based hedge fund company Cheyne Capital Management said in a statement. Standard & Poor's cut Cheyne Finance's ratings yesterday, citing the deteriorating market value of its assets.
Investor confidence in high-risk, high-yield loans worsened today, according to traders of credit- default swaps. The iTraxx LevX Index of contracts on loans to 35 European companies fell 0.125 to 95.75, according to Deutsche Bank AG. The index dropped to 92.5 on July 30, the lowest since it started trading in October.
When Interstate Bakeries Corp. announced Tuesday that it was withdrawing from the Southland bread market, it meant that after Oct. 20, local shoppers no longer will be able to buy Wonder Bread. Interstate is closing four bakeries - in Pomona, Glendale, Los Angeles and San Diego - as well as eliminating 325 distribution routes and closing 17 distribution centers and 19 outlet stores.
The hardest-hit area will be Pomona, home of the largest of the four bakeries. Company spokeswoman Maya Pogoda said 768 of the 1,300 jobs are either directly or indirectly related to the Pomona plant.
"Interstate Bakeries has been in Chapter 11 bankruptcy since September 2004 and the company made the decision they can't afford to have losing markets if they hope to get back to profitability," Pogoda said. "We will stop baking and selling bread after Oct. 20 and the plant will close Oct. 29."
T. Rowe Price New Era"s Manager Charles Ober: ExxonMobil and Schlumberger are blue chips that Ober still likes. Among the major oil companies, he also likes France's Total and England's BP. He also recommends energy service firms Baker Hughes and BJ Services.
On Thursday morning, equities shot up strongly right at the opening but not the financials, such as, Countrywide and Goldman Sachs.
The American Petroleum Institute reported a fall of 4.9 million barrels in crude supplies for the week ended August 24. The Energy Department had reported a decline of 3.5 million barrels for the latest week. Motor gasoline supplies were down 2.4 million barrels, the API said. The government reported that supplies were down 3.6 million barrels. Distillate supplies climbed 1.7 million barrels, the API said. They were up 900,000 barrels, according to the Energy Department. Refinery utilization, meanwhile, slipped 1.3 percentage points to 90.3 percent of capacity.
Altria Group Inc. said Wednesday that it will pursue a spinoff of Philip Morris International unit to its shareholders and the precise timing will be announced in January.
Enzio von Pfiel: "The yen is going to strengthen massively, we reckon from 116 now to about 100 within three months. Reason: the US market is headed for an October crash,and that implies that there is going to be plenty of blood on the streets as regards yen carry trades. They will get unwound, so people who previously sold yen and bought higher-yielding assets on margin will find their bankers calling them to cover yen positions. In our piece of 7th July we suggested continuing with the yen carry trade; now we suggest that you get out of the yen carry trade.
The yield on the three-month Treasury bill was yield was down 34 basis points at 3.987%, while the yield on the six-month bill was down 44 basis points at 4.244%.
Moody's believes that the firms, Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Bros and Bear Stearns, have sufficient earnings strength and diversification to be able to absorb the necessary mark-downs on the loan pipeline while still generating positive, albeit depressed, earnings and a respectable level of profitability.
Samsung has edged Motorola aside to become the world's second-largest maker of cell phones.
The average rate on a one-year adjustable mortgage surged to 6.51 percent, the highest since January 2001, from 5.84 percent the prior week. The rate also surpassed the cost of a 30-year fixed loan for the first time.
The Federal Reserve will probably cut its benchmark interest rate to 4 percent as slowing U.S. economic growth restrains inflation, said Edward Hyman, chairman of International Strategy and Investment Group.
According to Bloomberg, wheat rose to a record, extending a rally that began in March, on signs dry weather in Ukraine and Australia may hurt production, reducing world supplies already expected to be the lowest in 26 years. Ukraine, the world's seventh-largest wheat exporter, will ship 58 percent less grain this year after a three-month drought, the country's agriculture minister said. Hotter- than-normal weather may reduce production in Australia, a country that was expected to be the second-largest exporter in the marketing year that started June 1, analysts said.
Gold has gained 5.9 percent this year as the dollar has fallen 3.4 percent against the euro. Silver has dropped 7.2 percent this year. One might consider accumulating a position in silver at these levels.
December gold climbed $1.90 to close at $675.40 an ounce Wednesday. September silver gained 8 cents to end at $11.845 an ounce and September copper finished at $3.35 a pound, up 1.2%.
Oct. crude up 2.5%, or $1.78, to close at $73.51 a barrel. Natural gas dipped 12 cents to $5.47.
The Teamsters Union said it will ask a federal appeals court to block the Bush administration's plan to begin allowing Mexican trucks to carry cargo anywhere in the United States. The union said it has been told by officials in the Transportation Department's Federal Motor Carrier Safety Administration that the first Mexican trucks will be coming across the border on Saturday. Teamsters leaders said they planned to seek an emergency injunction today from the Ninth Circuit U.S. Court of Appeals in San Francisco.
Kevin Duffy: "The current credit meltdown is a solvency crisis. Cheap and plentiful credit is what caused the current mess. More of the same can only make it worse. It is only a matter of time before this shot of credit heroine wears off. As with all drugs, at some point simply increasing the dosage has little or no stimulative effect. Sometimes the best medicine is withdrawal."
The VIX took it on the chin on Wednesday and dropped back to the 23.50 level as the Dow jumped 247 points, the Nasdaq 62, and the S&P about 32. The financial sector did a bit better but nothing better than mediocre.
Dry bulk vessel costs, measured by the London-based Baltic Dry Index, on Wednesday reached an all-time high of 7,474 points, up almost 100 per cent over the past 12 months, pushing the cost of a Panamax to almost $60,000 a day.
These burgeoning costs are significantly higher than what was anticipated just 6 months ago. According to the FT, the International Grain Council, the industry body, last week said several important grain routes, notably from the US to Asia, had double the transit volume in the past year, contributing to rising dry bulk carrier freight costs.
Tuesday, August 28, 2007
State Of Flux
8/29/07 State Of Flux
Market conditions for vendors of dynamic random access memory components are set to worsen in September after prices for the oversupplied chips stabilized in July, which brought an end to severe price erosion that has rocked the industry this year, according to technology researcher iSuppli.
Previously, iSuppli hadn't expected DRAM prices to face pressure until October.
The researcher cuts it 2007 global DRAM revenue forecast to $34.6 billion, equating to growth of 2% over 2006. In April, iSuppli had projected that revenue would grow 8.6% on the year, reaching $36.9 billion.
Home Depot said it netted $7.9 billion from the sale of its Supply division. Hughes Supply is the crown jewel of this division. I was a stockholder in Hughes before it was sold to Home Depot for cash. Hughes is well run and a good business. I think Home Depot made a foolish decision to dump this division for so low a price.
EarthLink Inc. outlined a corporate restructuring plan, including the elimination of about 900 jobs.
The number of Americans without health insurance rose to 47 million from 44.8 million, 15.8% of the population. How many with insurance do not have catastrophic insurance?
The consumer confidence index fell from 111.9 in July to 105.0, its lowest level since last August.
The yen continues to gain strength versus the dollar.
The TICKS were really weak from Tuesday's opening of trading. The same is true for the advance/decline ratio. The VIX has rebounded to the 26 level, while the Nasdaq has plummeted 60 points, the S&P about 35, and the Dow fell 280 points. It's another wipe out day. The market closed at the low of the day, a bad sign for tomorrow.
Number-one U.S. drug benefit manager Medco Health Solutions will buy diabetes-care provider PolyMedica Corp. for $1.5 billion. The $53/share all-cash offer represents a 17% premium over Monday's $45.29 close.
U.S. national home prices in the second quarter slid a record 3.2% from a year earlier, according to Standard & Poor's S&P/Case-Shiller Home Price Index. “The year-over-year decline reported in the 2nd quarter of 2007 for the National Home Price Index is the lowest point in its reported history, which dates back to January 1987. On a regional level 17 of the 20 metro areas are showing declines in their annual growth rate from what was reported in May.”
Rob Kirby: "The Fed’s Open Market Operations have lately been almost exclusively REPOS of both Agency and Mortgaged-Backed paper. The temporary ‘funding’ being provided to the holders of this debt IN NO WAY resolves the underlying problem which is one of solvency, not liquidity. Unfortunately, increased liquidity and/or lower interest rates will not improve an insolvent counterparty’s creditworthiness. What the unprecedented ‘liquidity add’ amounts to is the “MUSIC” in a game of musical chairs. If as and when the MUSIC stops, it’s a pretty safe bet that chairs are going to be harder to find than hen’s teeth – because there are none."
The natural gas contract for September delivery expires Wednesday.
Gold for December delivery fell $2.70 to close at $673.50 an ounce on the New York Mercantile Exchange. October platinum rose $8.30 to end at $1,260.60 an ounce. December palladium fell $4.40, or 1.3%, to close at $332.55 an ounce and September copper dropped 3.80 cents to $3.3115 a pound.
TimesOnLine: "State Street, the American bank, has been identified as having $22 billion (£10.9 billion) of exposure to asset-backed commercial paper conduits, the off-balance sheet vehicles that have caused severe problems for rivals in recent weeks amid turmoil in credit markets. According to regulatory filings, the Boston-based bank has credit lines to at least six conduits, which account for 17 per cent of its total assets. That proportion makes State Street the most highly exposed bank to conduits among its European and American peers."
The benchmark 10-year Treasury note was up 11/32 at 101 24/32 with a yield of 4.531%. The 30-year long bond was up 1/32 at 102 5/32, with a yield of 4.863%. The two-year note was up 6/32 at 100 30/32 with a yield of 4.119%. The dollar remains under pressure as it nears the 80 level.
"The political power of the occupiers is collapsing rapidly," Iran's Ahmadinejad said at a news conference, referring to U.S. troops in Iraq. "Soon, we will see a huge power vacuum in the region. Of course, we are prepared to fill the gap, with the help of neighbors and regional friends like Saudi Arabia, and with the help of the Iraqi nation."
Crude-oil for October delivery traded on the New York Mercantile Exchange finished with a 19-cent loss at $71.74 a barrel. Natural gas for September gained 25.5-cent, or 4.7%, to $5.635 per million British thermal units.
Market conditions for vendors of dynamic random access memory components are set to worsen in September after prices for the oversupplied chips stabilized in July, which brought an end to severe price erosion that has rocked the industry this year, according to technology researcher iSuppli.
Previously, iSuppli hadn't expected DRAM prices to face pressure until October.
The researcher cuts it 2007 global DRAM revenue forecast to $34.6 billion, equating to growth of 2% over 2006. In April, iSuppli had projected that revenue would grow 8.6% on the year, reaching $36.9 billion.
Home Depot said it netted $7.9 billion from the sale of its Supply division. Hughes Supply is the crown jewel of this division. I was a stockholder in Hughes before it was sold to Home Depot for cash. Hughes is well run and a good business. I think Home Depot made a foolish decision to dump this division for so low a price.
EarthLink Inc. outlined a corporate restructuring plan, including the elimination of about 900 jobs.
The number of Americans without health insurance rose to 47 million from 44.8 million, 15.8% of the population. How many with insurance do not have catastrophic insurance?
The consumer confidence index fell from 111.9 in July to 105.0, its lowest level since last August.
The yen continues to gain strength versus the dollar.
The TICKS were really weak from Tuesday's opening of trading. The same is true for the advance/decline ratio. The VIX has rebounded to the 26 level, while the Nasdaq has plummeted 60 points, the S&P about 35, and the Dow fell 280 points. It's another wipe out day. The market closed at the low of the day, a bad sign for tomorrow.
Number-one U.S. drug benefit manager Medco Health Solutions will buy diabetes-care provider PolyMedica Corp. for $1.5 billion. The $53/share all-cash offer represents a 17% premium over Monday's $45.29 close.
U.S. national home prices in the second quarter slid a record 3.2% from a year earlier, according to Standard & Poor's S&P/Case-Shiller Home Price Index. “The year-over-year decline reported in the 2nd quarter of 2007 for the National Home Price Index is the lowest point in its reported history, which dates back to January 1987. On a regional level 17 of the 20 metro areas are showing declines in their annual growth rate from what was reported in May.”
Rob Kirby: "The Fed’s Open Market Operations have lately been almost exclusively REPOS of both Agency and Mortgaged-Backed paper. The temporary ‘funding’ being provided to the holders of this debt IN NO WAY resolves the underlying problem which is one of solvency, not liquidity. Unfortunately, increased liquidity and/or lower interest rates will not improve an insolvent counterparty’s creditworthiness. What the unprecedented ‘liquidity add’ amounts to is the “MUSIC” in a game of musical chairs. If as and when the MUSIC stops, it’s a pretty safe bet that chairs are going to be harder to find than hen’s teeth – because there are none."
The natural gas contract for September delivery expires Wednesday.
Gold for December delivery fell $2.70 to close at $673.50 an ounce on the New York Mercantile Exchange. October platinum rose $8.30 to end at $1,260.60 an ounce. December palladium fell $4.40, or 1.3%, to close at $332.55 an ounce and September copper dropped 3.80 cents to $3.3115 a pound.
TimesOnLine: "State Street, the American bank, has been identified as having $22 billion (£10.9 billion) of exposure to asset-backed commercial paper conduits, the off-balance sheet vehicles that have caused severe problems for rivals in recent weeks amid turmoil in credit markets. According to regulatory filings, the Boston-based bank has credit lines to at least six conduits, which account for 17 per cent of its total assets. That proportion makes State Street the most highly exposed bank to conduits among its European and American peers."
The benchmark 10-year Treasury note was up 11/32 at 101 24/32 with a yield of 4.531%. The 30-year long bond was up 1/32 at 102 5/32, with a yield of 4.863%. The two-year note was up 6/32 at 100 30/32 with a yield of 4.119%. The dollar remains under pressure as it nears the 80 level.
"The political power of the occupiers is collapsing rapidly," Iran's Ahmadinejad said at a news conference, referring to U.S. troops in Iraq. "Soon, we will see a huge power vacuum in the region. Of course, we are prepared to fill the gap, with the help of neighbors and regional friends like Saudi Arabia, and with the help of the Iraqi nation."
Crude-oil for October delivery traded on the New York Mercantile Exchange finished with a 19-cent loss at $71.74 a barrel. Natural gas for September gained 25.5-cent, or 4.7%, to $5.635 per million British thermal units.
Monday, August 27, 2007
Justice
8/28/07 Justice
Justice can arrive late. But better late than never. Alberto Gonzalez finally resigned.
Yahoo announced two real-time communication features that are the first of their kind from a leading Web mail service. These include the ability to send free text messages from Yahoo! Mail to mobile phone numbers in the US, Canada, India, and the Philippines, and the ability to send instant messages (IM) from Yahoo! Mail to members of the world's largest combined IM community, including users of Yahoo! Messenger and Windows Live® Messenger(2).
Home Depot's board agreed to sell Home Depot Supply for $8.5 billion to Bain Capital, Carlyle Group and Clayton, Dubilier & Rice, about 18% less than the price hammered out in June. In addition, Home Depot itself will hold about 12.5% of the unit's equity and guarantee some of the debt issued by the banks to finance the acquisition. Basically, it cost about $8+ billion to buy the components of the Supply division. The only ones to get rich on this will be lawyers and possibly the private equity guys and possibly the investment bankers putting the debt package together. This is, in my view, a lousy deal for the shareholders.
The Home Depot has launched its bid to sell to the world's most populous nation.
At a ceremony Sunday in Beijing that included drummers and dragon dancers — a traditional Chinese symbol for luck — Annette Verschuren, Home Depot's president for Asia and Canada, called the company's investment in 12 stores a "historic milestone" for the world's largest home improvement retailer.
U.S. Steel Corp is to acquire Stelco Inc for about $1.1 billion to strengthen its position as a supplier of flat-rolled steel products in North America, the companies said. U.S. Steel will acquire Stelco for C$38.50 per share, amounting to about $1.1 billion, based on about 30 million fully diluted shares, according to the companies.
Nasdaq may sell its stake in the London Stock Exchange to Borse Dubai and make a joint bid with the Gulf exchange for Nordic exchange owner OMX , The Daily Telegraph said on Monday.
Kazakhstan on Monday called a three-month halt to work at the giant Kashagan oilfield, claiming that a consortium led by Italy's ENI had broken environmental rules at the project and evaded customs duties on imported equipment.
Bad credit has supplanted terrorism as the gravest immediate risk threatening the economy, a key national research group reported Monday.
Borrowers' withering ability to pay their bills and the subsequent fallout in the credit markets this summer topped the list of short-term risks on peoples' minds, according to a survey of 258 members conducted by the National Association of Business Economics.
Indian companies that process U.S. mortgages are reporting fewer work orders and diminishing revenue because of the subprime loan fallout overseas. Several companies have moved employees once assigned to mortgage documentation and related services to other areas. There is a fear of layoffs should the crisis in the United States continue.
John Hussman: " Indeed, there is no evidence that historically reliable valuation measures have lost their validity. Though the stock market has maintained relatively high multiples since the late 1990's, those multiples have thus far been associated with poor extended returns. Specifically, based on the most recent, reasonably long-term period available, the S&P 500 has (predictably) lagged Treasury bills for not just seven years, but now more than eight-and-a-half years. Investors will place themselves in quite a bit of danger if they believe that the “echo bubble” from the 2002 lows is some sort of new era for market valuations."
In the Bay Area, home sales volume has fallen to the lowest level in 12 years. Although prices in certain higher-end communities are holding steady, they are decreasing in neighborhoods with a large number of new or entry-level homes. Houses are lingering on the market much longer.
Former US Treasury Secretary Larry Summers warned that the United States may be heading into recession as the biggest victim to date of the sub-prime mortgage debacle was humiliatingly sold for a token sum in Germany."It would be far too premature to judge this crisis over," Mr Summers said. "I would say the risks of recession are now greater than they've been any time since the period in the aftermath of 9/11."
Acer said it would pay $1.90 per Gateway share, representing a premium of 57 percent over Gateway's last closing price.
Sales of existing homes dropped for a fifth straight month in July, falling to the slowest pace in nearly five years, while home prices fell for a record 12th consecutive month. The National Association of Realtors reported that sales of existing homes dipped by 0.2 percent last month to a seasonally adjusted annual rate of 5.75 million units.The median price of a home sold last month slid to $230,200, down by 0.6 percent from the median price a year ago. It marked the 12th consecutive month that home prices have declined compared with a year ago, an all-time high. The supply of homes for sale at the end of the month climbed 5.1 percent to 4.59 million. At the current sales pace, that represented 9.6 months' worth, up from 9.1 months' worth at the end of the prior month. The inventory of single-family homes represented a 9.2 months' supply, the most since October 1991.
Lyle Gramley, a former Fed governor and now senior economic adviser to the Stanford Group Co. in Washington:``The economist who has done the seminal work on the impact of credit crunches on the economy is named Ben S. Bernanke. He's well aware of the fact that this situation could pose serious downside risks for the U.S. economy. His views are the ones that are going to ultimately prevail.''
Hilaire Belloc: “Statistics are the triumph of the quantitative method, and the quantitative method is the victory of sterility and death”
Southwest is offering three round-trip, non-stop flights a day between San Francisco and Chicago's Midway Airport, eight non-stop daily flights to San Diego and seven daily non-stop flights to Las Vegas. They had stopped flying from SF in 2001.
European Central Bank President Jean- Claude Trichet stepped back from his earlier signal that interest rates will be increased next week, saying policy makers plan to wait before deciding whether financial market turbulence is hurting economic growth.
The collapse of the subprime home mortgage market is infecting the U.S. auto industry. Car and truck buyers, especially those with lower credit scores, often are finding it harder to get financing. Vehicle-loan delinquencies are rising among higher-risk customers. And as budget-squeezed consumers put off vehicle purchases, industry forecasters are cutting their sales predictions for 2007.
Iran's envoy to Beijing, Javad Mansouri, says the volume of trade exchange between Iran and China is to reach 18 billion dollars in 2007, which is a rise of about twenty percent.
Gold for December delivery fell $1.30 to close at $676.20 an ounce on the New York Mercantile Exchange. Lead, aluminum, and copper were standout winners on Monday. According to Bloomberg, refined-copper imports in China, the world's biggest consumer of the metal, jumped 65 percent last month and have more than doubled in the January-through-July period. The country has bought more of the metal in the past seven months than in the whole of 2006.
China, the world's biggest aluminum producer and consumer, is likely to go back to being a net importer of the metal in a few years, despite its surging production, a senior industry official said Monday. "(To shift back to being a net importer) is entirely possible. It will probably come after 2010," Pan Jiazhu, secretary general of China Nonferrous Metals Industry Association, told Dow Jones Newswires in an interview.
Crude oil for October delivery rose 88 cents to close at $71.97 a barrel on the New York Mercantile Exchange, marking the contract's highest closing level since August 15. September reformulated gasoline rose 5.79 cents, or nearly 3%, to close at $2.0393 a gallon. ``Gasoline is very tight in the harbor,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``Traders believe the strength in September gasoline will spill over into the October contract.'' Natural gas closed off the day's low but still declined 16 cents to $5.37.
The yen snapped a three-day decline against the dollar and euro as traders pared riskier investments funded by loans in Japan.
Brett Steenbarger:"Recently, the gap in yields between 3 month Treasury bills and 3 month commercial paper widened significantly... The resulting run for the safety of T-bills depressed their yields, creating a gap last week of 1.92%. To put that into perspective, I went back to 1980 (N = 1444 trading weeks) and found that this was the widest gap during that time. Indeed, the second widest gap was 1.43%, registered during the market panic in October, 1987. The median gap since 1980 has been 1.09%."
Justice can arrive late. But better late than never. Alberto Gonzalez finally resigned.
Yahoo announced two real-time communication features that are the first of their kind from a leading Web mail service. These include the ability to send free text messages from Yahoo! Mail to mobile phone numbers in the US, Canada, India, and the Philippines, and the ability to send instant messages (IM) from Yahoo! Mail to members of the world's largest combined IM community, including users of Yahoo! Messenger and Windows Live® Messenger(2).
Home Depot's board agreed to sell Home Depot Supply for $8.5 billion to Bain Capital, Carlyle Group and Clayton, Dubilier & Rice, about 18% less than the price hammered out in June. In addition, Home Depot itself will hold about 12.5% of the unit's equity and guarantee some of the debt issued by the banks to finance the acquisition. Basically, it cost about $8+ billion to buy the components of the Supply division. The only ones to get rich on this will be lawyers and possibly the private equity guys and possibly the investment bankers putting the debt package together. This is, in my view, a lousy deal for the shareholders.
The Home Depot has launched its bid to sell to the world's most populous nation.
At a ceremony Sunday in Beijing that included drummers and dragon dancers — a traditional Chinese symbol for luck — Annette Verschuren, Home Depot's president for Asia and Canada, called the company's investment in 12 stores a "historic milestone" for the world's largest home improvement retailer.
U.S. Steel Corp is to acquire Stelco Inc for about $1.1 billion to strengthen its position as a supplier of flat-rolled steel products in North America, the companies said. U.S. Steel will acquire Stelco for C$38.50 per share, amounting to about $1.1 billion, based on about 30 million fully diluted shares, according to the companies.
Nasdaq may sell its stake in the London Stock Exchange to Borse Dubai and make a joint bid with the Gulf exchange for Nordic exchange owner OMX , The Daily Telegraph said on Monday.
Kazakhstan on Monday called a three-month halt to work at the giant Kashagan oilfield, claiming that a consortium led by Italy's ENI had broken environmental rules at the project and evaded customs duties on imported equipment.
Bad credit has supplanted terrorism as the gravest immediate risk threatening the economy, a key national research group reported Monday.
Borrowers' withering ability to pay their bills and the subsequent fallout in the credit markets this summer topped the list of short-term risks on peoples' minds, according to a survey of 258 members conducted by the National Association of Business Economics.
Indian companies that process U.S. mortgages are reporting fewer work orders and diminishing revenue because of the subprime loan fallout overseas. Several companies have moved employees once assigned to mortgage documentation and related services to other areas. There is a fear of layoffs should the crisis in the United States continue.
John Hussman: " Indeed, there is no evidence that historically reliable valuation measures have lost their validity. Though the stock market has maintained relatively high multiples since the late 1990's, those multiples have thus far been associated with poor extended returns. Specifically, based on the most recent, reasonably long-term period available, the S&P 500 has (predictably) lagged Treasury bills for not just seven years, but now more than eight-and-a-half years. Investors will place themselves in quite a bit of danger if they believe that the “echo bubble” from the 2002 lows is some sort of new era for market valuations."
In the Bay Area, home sales volume has fallen to the lowest level in 12 years. Although prices in certain higher-end communities are holding steady, they are decreasing in neighborhoods with a large number of new or entry-level homes. Houses are lingering on the market much longer.
Former US Treasury Secretary Larry Summers warned that the United States may be heading into recession as the biggest victim to date of the sub-prime mortgage debacle was humiliatingly sold for a token sum in Germany."It would be far too premature to judge this crisis over," Mr Summers said. "I would say the risks of recession are now greater than they've been any time since the period in the aftermath of 9/11."
Acer said it would pay $1.90 per Gateway share, representing a premium of 57 percent over Gateway's last closing price.
Sales of existing homes dropped for a fifth straight month in July, falling to the slowest pace in nearly five years, while home prices fell for a record 12th consecutive month. The National Association of Realtors reported that sales of existing homes dipped by 0.2 percent last month to a seasonally adjusted annual rate of 5.75 million units.The median price of a home sold last month slid to $230,200, down by 0.6 percent from the median price a year ago. It marked the 12th consecutive month that home prices have declined compared with a year ago, an all-time high. The supply of homes for sale at the end of the month climbed 5.1 percent to 4.59 million. At the current sales pace, that represented 9.6 months' worth, up from 9.1 months' worth at the end of the prior month. The inventory of single-family homes represented a 9.2 months' supply, the most since October 1991.
Lyle Gramley, a former Fed governor and now senior economic adviser to the Stanford Group Co. in Washington:``The economist who has done the seminal work on the impact of credit crunches on the economy is named Ben S. Bernanke. He's well aware of the fact that this situation could pose serious downside risks for the U.S. economy. His views are the ones that are going to ultimately prevail.''
Hilaire Belloc: “Statistics are the triumph of the quantitative method, and the quantitative method is the victory of sterility and death”
Southwest is offering three round-trip, non-stop flights a day between San Francisco and Chicago's Midway Airport, eight non-stop daily flights to San Diego and seven daily non-stop flights to Las Vegas. They had stopped flying from SF in 2001.
European Central Bank President Jean- Claude Trichet stepped back from his earlier signal that interest rates will be increased next week, saying policy makers plan to wait before deciding whether financial market turbulence is hurting economic growth.
The collapse of the subprime home mortgage market is infecting the U.S. auto industry. Car and truck buyers, especially those with lower credit scores, often are finding it harder to get financing. Vehicle-loan delinquencies are rising among higher-risk customers. And as budget-squeezed consumers put off vehicle purchases, industry forecasters are cutting their sales predictions for 2007.
Iran's envoy to Beijing, Javad Mansouri, says the volume of trade exchange between Iran and China is to reach 18 billion dollars in 2007, which is a rise of about twenty percent.
Gold for December delivery fell $1.30 to close at $676.20 an ounce on the New York Mercantile Exchange. Lead, aluminum, and copper were standout winners on Monday. According to Bloomberg, refined-copper imports in China, the world's biggest consumer of the metal, jumped 65 percent last month and have more than doubled in the January-through-July period. The country has bought more of the metal in the past seven months than in the whole of 2006.
China, the world's biggest aluminum producer and consumer, is likely to go back to being a net importer of the metal in a few years, despite its surging production, a senior industry official said Monday. "(To shift back to being a net importer) is entirely possible. It will probably come after 2010," Pan Jiazhu, secretary general of China Nonferrous Metals Industry Association, told Dow Jones Newswires in an interview.
Crude oil for October delivery rose 88 cents to close at $71.97 a barrel on the New York Mercantile Exchange, marking the contract's highest closing level since August 15. September reformulated gasoline rose 5.79 cents, or nearly 3%, to close at $2.0393 a gallon. ``Gasoline is very tight in the harbor,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``Traders believe the strength in September gasoline will spill over into the October contract.'' Natural gas closed off the day's low but still declined 16 cents to $5.37.
The yen snapped a three-day decline against the dollar and euro as traders pared riskier investments funded by loans in Japan.
Brett Steenbarger:"Recently, the gap in yields between 3 month Treasury bills and 3 month commercial paper widened significantly... The resulting run for the safety of T-bills depressed their yields, creating a gap last week of 1.92%. To put that into perspective, I went back to 1980 (N = 1444 trading weeks) and found that this was the widest gap during that time. Indeed, the second widest gap was 1.43%, registered during the market panic in October, 1987. The median gap since 1980 has been 1.09%."
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